The monetary and fiscal system have witnessed an improvement in 2010 and expectations that year 2011 will be much better .
Yemen’s Central Bank Governor Mohamed Awad bin Hammam comments on an intereview with bloomberg that country’s lending rate and the economy. The Central Bank Governor spoke late yesterday in an interview in Sana’a, the Yemeni capital.
On currency stabilization:
“The Central Bank was able to stabilize the rate by selling around $577 million to the market to satisfy demand and also by increasing the benchmark rate from 10 percent to 15 and 20 percent.”
“We expect that the exchange rate will be stable during 2011. We expect that 2011 will witness new foreign currency inflows in the form of” liquefied natural gas revenue.
“We also expect inflows from new investments in free zone areas in Aden and industrial zones in several governorates, and from disbursement of commitments made by” Gulf countries.
“We expect that CBY will be in a buyer’s position in 2011 and, hence, our sale will not be in the same levels of 2010.”
On 2011 budget deficit:
“The budget deficit has been reduced in 2011 to about 3.6 percent of gross domestic product and we expect it to be reduced further given that the oil prices have gone much higher than budget price of $55 per barrel.”
On Islamic banks in Yemen:
“We are working now with our partners both in the Ministry of Finance and the IMF towards the first issue of Islamic sukuk that should work as an important investment vehicle for Islamic banks.
“This will help increase investment in the economy by Islamic banks and reduce their investments abroad.”
On the interest rate:
“We believe the current rate is high enough and we are aware of the crowding out effect this rate has on available credit to the private sector.”
“We are monitoring the situation and will revisit existing interest rate policies once we are confident of the stability of the exchange rate and prices.”
On economic impact of political and militant problems:
“These woes have affected tourism growth.”
“This also might have diverted some direct investments from Yemen. Tourism and direct investments are very important for growth of the economy.”
On Yemen’s foreign debt:
“The recent increase has been as a result of foreign exchange appreciation stemming from certain loans the currency of which is not U.S. dollar.”
“We expect, however, that 2011 will witness further disbursements from new loans negotiated with the IMF and Arab Monetary Fund.”