Reem Al-Fadhli (South24)

In early December of last year, a decision was issued to appoint Ahmed Ghaleb Al-Maabiqi as the new Governor of the Central Bank of Yemen and Mohammad Omar Banaja as his Deputy. Immediately following these decisions, the local currency witnessed a significant improvement in its value against foreign currencies, after a record historical low. 

The value of the Yemeni riyal (YER) improved significantly following the appointments on December 6th, after the US dollar was recorded at 1,700 YER before the appointment of this administration; its value fell to 800 YER after it. Economists linked this rapid improvement to the impact of the news of a new Saudi financial deposit to the Central Bank which coincided with the decisions to appoint the new administration.

YER between improvement and decline during the appointment period

After a few days of improvement in the value of the local currency- which brought some reassurance to people who cling to a glimmer of hope in the face of all the crushing conditions. the value of YER again declined as the dollar reached more than 1,100 YER in late January.

Sabreen Shaye’, a female citizen from Aden described how it sounds like a "nightmare which repeats its horrible moments every time she tries to get out of it in a way that drains her completely."

In an interview with "South24", Sabreen detailed her suffering as she said: “Although I receive my salary in hard currency, the recent conditions in Aden have negatively impacted me. I have incurred a heavy loss while prices remained the same. The authorities don't monitor or control the prices of various commodities".

For his part, Researcher and Economic Analyst, Waheed Al-Fawdaei, believes that "one of the reasons that played a major role in the instability of prices in the past and their decline to a historical record low level before changing the Central Bank was due to a trust crisis between dealers in the exchange market from one side and the government and its Central Bank from the other side"

Waheed explained, in an interview with "South24", that this crisis was due to "the negative news about the government and the Central Bank and their inability to manage the banking policy in the country or control exchange rates and about corruption in the corridors of the Bank and the government, as indicated by the UN Experts' Report."

Waheed pointed out that this news "had a significant impact in influencing the increase in exchange rates and bringing the situation to its current level" pointing out that "as soon as a new Central Bank’s Governor was appointed, the exchange rate fell directly with the expectation of more reforms."

Reforms

The reforms in the Central Bank of Yemen in December were not limited to the Governor and his Deputy, but also included a number of important positions ^[1], such as the Representative of the Minister of Finance and a number of Board Members as well as the Banking Supervision Sector, as Mansour Abdulkarim Rajeh was appointed as its new Director. ^[2]

Regarding the reforms in the Central Bank of Yemen, Bassam Saleh Naji, Director of the Central Bank’s Governor’s office, told "South24": “We are currently working on focusing on the operation of governance, which includes the periodicals meetings, the Board of Directors and discussing monetary indicators. This is the main concern of the current administration as well as regarding the problem of price stability and regulation of the banking sector.

Bassam added that the new bank administration "works in parallel with all economic sectors in order to achieve stability in economic indicators, including stability in exchange rates and work to end inflation as stipulated in the Central Bank Law."

Waheed described the reforms in the banking supervision sector as “an important and a decisive point by the recent decisions that were taken, because this sector is considered a main pillar in the work of the Central Bank. it is a sensitive and important sector, and you will notice many reforms in the banking sector and an increase in supervising banks and money exchangers and the way of monitoring them"

He continued, "There is nothing tangible so far at work, but we noticed that the continuation of auctions and the continued positive news played a role in the relative stability in exchange rates, as well as the increase in oversight in the banking sector's work."

Fake stability

According to the Economist, Majed Al-Daari, "the exchange rate cannot be stabilized at the levels of 1100 or even 2000 unless there are comprehensive national economic reforms of the state's financial, tax and customs system."

Al-Daari told "South24" that “the current exchange stability is linked to money changers and stock market whales from buying currencies and their fear of the blurring of vision resulting from the bank's foreign visits and his meeting with his Emirati counterpart and the head of the Arab Monetary Fund, as well as their fear that the KSA will soon grant a new bailout deposit."

He believes that "fighting corruption, activating the control and accounting bodies, the temporary closure of exchange companies comes in conjunction with an international supportive move for the state, providing a bailout deposit, returning grants and foreign financial aid to the state, removing international and regional sanctions related to bank transfers to and from Yemen, lifting the block on Yemen's funds, and reactivating banking relations between Gulf and international banks and the Yemeni banks, the first of which is the Central Bank of Yemen in Ade. Additionally, this includes supplying all state, oil and gas revenues in hard currency to the government’s accounts at the Central Bank. All of this constitutes the

solutions that must be followed by the government and the concerned authorities”. 

Why hasn't the deposit come yet?

Since the appointment of Al-Mabaqi as Governor of the Central Bank, reports confirmed the intention of the KSA and the Gulf Cooperation Council countries, to support the Central Bank in Aden with a new financial deposit with the development of new mechanisms to manage it, and to ensure an influential and effective use of it on the economic and living situation in Yemen in general

In press interviews, Yemeni Prime Minister, Maeen Abdulmalik, talked about this deposit ^[3] and underway reforms, which he said” had yielded results during this period as the government was able to control speculation in the currency market, which improved by more than 40%,” ^[4]

Regarding the Saudi deposit, Al-Fawdaei said that "until this moment, the Saudi side has not declared it, and all we heard about the deposit are statements by Yemeni officials, led by the prime minister. We do not know the truth about the type of this deposit and whether it is an actual financial deposit or just a guarantee."

He added, "According to what Maeen Abdulmalik said in one of his interviews, the deposit is paired with reforms, and won't be granted without carrying out them”.

Al-Fawdaei stressed that “promises to provide the bank with any form of support are mainly related to reforms, some of which are already underway, including the decision to regulate oil derivatives, the decision to rationalize goods, including luxury goods, for example, the decision to form the budget committee, which is important because It indicates the existence of a budget that may be ready at the beginning of next March and can be used for the rest of the year.”

Al-Fawdaei believes that this is "an indication of the adoption of serious reforms in the process." He added: “The Prime Minister has recently hinted at decisions that will be disclosed, which will be important decisions”.

Majed Al-Daeri said, "The deposit is conditional on difficult terms that cannot be achieved under the continuous current conditions. The most important of which is moving banks’ administrations to Aden, completing a set of economic reforms, corporate governance, fighting corruption, clarifying the fate of the previous deposit, and other conditions."

Al-Daeri believes that "if these reforms are not completed, the deposit will be null and can’t be relied upon from a logical and realistic view."

Important external meetings

In the previous days, the new Governor of the Central Bank met with a number of Gulf officials in the UAE, Saudi Arabia and Kuwait, and these meetings focused on ways that support the Yemeni economy.

Regarding these meetings, Majed Al-Daari revealed that "the Governor feels sorry that all parties disappointed him so far, but he is still insisting on continuing his work and clinging to hope that the promises of support for the alliance and the government's cooperation with him will be fulfilled."

 He said that the Governor of the Central Bank "is more aware than others of the seriousness of the situation if he abandons his mission as being one of the last cards of legitimacy to save the catastrophic banking situation in the event that he apologizes for continuing his mission."

Moreover, Waheed Al-Fawdaei believes that "all the circulating talks and news that say that there is a coming great external support are not true and carry a lot of exaggeration." 

"There will be nothing new when the Governor of the Central Bank returns. He went to the UAE to meet with the Board of the Arab Monetary Fund in order to demand facilities to be used for the stability of the currency with the help of the KSA and the UAE."

Reem Al-Fadhli

Journalist and Editor at South24 Center for News and Studies

Photo: The first meeting of the Board of Directors of the Central Bank of Yemen February 2, 2022 (official).