The Central Bank of Yemen Increases Interest Rates to Stabilize Riyal
The central bank of yemen, currently in the grips of a war, has decided to increase the interest rates on the deposits to 27% which is the highest it has ever been. This is an effort to stabilize the falling riyal which has resulted in a massive price hike of food items.
The interest rates on the government bonds have also been increased from 12% to 17%. Additionally, the bank has placed a bank of taking over $10,000 out of Yemen without getting a prior permit.
According to the central bank, the previous interest rate on the deposits was 17%. However, by increasing the interest rates, the central bank hopes that the riyal can be strengthened. It may also help in reducing the inflation which has been rising uncomfortably.
There is an ongoing military campaign against the Houthi militants which have been supported by Iran. The Houthis are currently in control of the capital. Since the start of this campaign in March of 2015, the Yemeni riyal has ended up losing over two-thirds of its value.
Since the beginning of 2018, the currency of Yemen has fell by over 36% despite a deposit of $2 billion being placed by Saudi Arabia in the central bank. The central bank is currently based in Aden, the temporary capital of the Yemeni government which is recognized internationally.
The drop in the currency’s value has caused a massive hike in the costs of commodities such as fuel and food. In January, the government of Yemen issued what was the first budget in 3 years. That budget projected a deficit of $1.3 billion.
The high costs of living ended up causing widespread protests early this September in South Yemen. The government had to raise the salaries by 30%.