Experts: Printing the currency, whether old or new, without a cover, is the reason for the collapse of the riyal
English - Thursday 12 August 2021 الساعة 11:32 am
Aden, NewsYemen:
Experts and academics stressed the need for the Central Bank to take further and sequential steps, in order to achieve its goal of pumping banknotes from the old edition, and addressing price distortions between governorates. A group of researchers, academics, and those interested in economic affairs.
The head of the Center for Studies and Economic Media, Mustafa Nasr, said that this procedure is subject to the type and nature of the decisions that the Houthis will take, to respond to this step, ruling out at the same time the Houthis' ability to sort banknotes in denominations of one thousand riyals in the old format, and prevent their access to areas that fall within scope of his control.
The banking expert, Yasser Al-Maqtari, said that he expected the Houthis to deal with a very large part of the quantities that the Central Bank announced the start of the process of pumping them into the banking market.
Al-Maqtari pointed out that there is a significant shortage in the money supply in the areas under the control of the Houthi group, pointing out that the group will seek to cover its needs of the local currency, through the quantities that the Central Bank in Aden will pump to the banking market.
For his part, Professor of Economics at the University of Aden, Dr. Hisham Al-Sarmi, believes that the strike of the Exchangers Association in Aden confuses the steps of the Central Bank in addressing price distortions, with its announcement of pumping banknotes from the old currency, and selling sukuk and bonds worth four hundred billion riyals to withdraw the new edition, and start recovering Controlling the monetary mass in the banking market.
As for the economic researcher, Waheed Al-Fawdaei, he believes that the strike of the Exchangers Association in Aden, aimed at distorting the path and camouflaging the accusations leveled against the exchange facilities and companies, of speculating in the currency, and causing the deterioration of the value of the riyal, by creating an artificial demand for foreign currencies.
ambiguous indicators
Dr. Hisham Al-Sarmi talked about currency printing and its future effects on economic inflation.
Al-Sarmi touched on two areas in the currency printing process, pointing out that there is a different effect of the two editions of the Yemeni currency, which dates back to 2017, and the other, which the Central Bank has decided to take down now in conjunction with the withdrawal of a quantity of the new edition.
He explained that the printing of the riyal in the new form affects inflation in a very large way, since the printing process took place without a cover of foreign exchange, pointing to its effects on the level of demand, through the availability of quantities among citizens, the high cost of import and the loss of part of foreign exchange, then starting the process inflation.
As for the old edition, which was recently announced by the Central Bank, Dr. Hisham Al-Sarmi believes that it has a different situation, as it was revealed to end the gap or reduce the level of the gap between the new and old riyals, between the areas of legitimacy and the Houthis.
He considered that its effects on inflation are related to the volume of quantities that are pumped into the banking market.
The professor of economics at the University of Aden said that if the quantities of the broad edition are commensurate with the level of withdrawal, it will not have a significant impact, given that the money supply has not changed.
He added, "The impact will be on the level of transfer, and the responsibility here lies with the coordination between the central bank and the government in general, because the task cannot be carried out by the central bank unilaterally," as he described it.
He pointed out that there are positive and negative indicators, as a result of the decision of the Central Bank in Aden to pump old banknotes, but it was not clear in general, expressing his hope that this step will have positive effects.
Regarding the impact on inflation in the future, Al-Sarmi indicated that the issue will be related to the government’s foreign exchange revenues, and there will be no impact on inflation if the central bank succeeds in creating a balance process between the old and new edition.
Dr. Abdul-Ghani Jagman had a different point of view, as he believes that since the Central Bank of Yemen’s decision to pump old banknotes, the exchange rate has not improved, despite the fact that financial markets are very sensitive to any government decisions or statements issued by the Central Bank.
Chagman pointed out that printing the currency, whether old or new, all without a cash cover, is a reason for the collapse of exchange rates, pointing to the lack of trust between citizens, banks and the government.
And about the actions of the Aden Central against money changers and exchange shops, he indicated that the money changers control a large percentage of the money supply, which requires their containment instead of the closure campaigns that affected most exchange shops and companies, he said.
He pointed out that raising the customs dollar will enhance smuggling, and will affect citizens negatively in all places, and will not support government revenues and the economy will not recover.
Dr. Jagman said that the economy will recover only by supplying foreign exchange resources from oil sales to the Central Bank of Yemen, where he indicated that Yemen exports sixty thousand barrels per day, equivalent to four million dollars per day, or one hundred and twenty million dollars per month.
He explained that these sums of money should be supplied to the Central Bank, in order to support the market and maintain the stability of the currency, in addition to stopping currency printing and reducing the budget deficit, calling for the neutralization of the economy and unification of efforts between Aden and Sanaa in the interest of serving the people and ending the economic and humanitarian crisis.
