Yemen’s central bank denies depletion of foreign currency reserves

Yemen’s central bank has sufficient foreign reserves outside the country to fulfill its needs for hard currency and payments for imports, the Aden-based lender said.

The bank rejected media reports that its reserves had fallen below $200 million and said that despite the suspension of crude exports it had sufficient funds to meet demand and stabilize the national currency.

The reserves were held in a number of international banks and were sufficient for it to carry out its duties, it said.

It added it “will continue to hold weekly (foreign exchange) auctions to cover a portion of the market’s foreign currency requirements for imports of basic and essential materials through a transparent and competitive mechanism.”

The statement came after a Reuters report citing three Yemeni government sources said the central bank’s foreign currency reserves were almost depleted, having fallen below $200 million.

One of the sources declined to give a figure for the value of the reserves — to prevent a collapse of the Yemeni riyal — but the lender dismissed the claims and said its reserves were healthy.

Concerns were raised after representatives from the International Monetary Fund said that Houthi attacks on oil facilities in government-controlled Hadramout and Shabwa had reduced the country’s primary source of foreign currency revenue by more than 50 percent, which along with the rise in global oil prices, would increase its fiscal deficit to 2.5 percent of GDP in 2022.

“Without a resumption of oil exports, the deficit is expected to widen further in 2023 despite cuts in much-needed expenditures,” the IMF team’s leader Joyce Wong said.

But she lauded the Yemeni government’s efforts to bolster the economy and increase revenue, which include strengthening state bodies, controlling expenditure, budget planning, tax management, taking additional measures to implement market exchange rates for customs revenues and controlling inflation.

“The mission encouraged the authorities to maintain this welcome reform momentum, including to push forward reforms in the electricity sector to reduce costs and increase revenue collection.”

Despite the central bank’s upbeat statement and the IMF’s backing for the government, the Yemeni riyal on Thursday fell to a new low of 1,350 to the US dollar, from 1,200 a month ago.

The currency began falling late last month, probably due to a stalemate in international diplomatic efforts to achieve a deal between Yemen’s warring factions.