Two Birds With One Stone: Using Aid Transfers to Support Stable Commodity Prices in Yemen
Coherent Identifier 20.500.12592/nfhtsc

Two Birds With One Stone: Using Aid Transfers to Support Stable Commodity Prices in Yemen

4 August 2023

Summary

Prior to the conflict, Yemen’s primary sources of hard currency (FX) were hydrocarbon exports and remittances.[1] The suspension of oil exports at the onset of the conflict and the broader impacts of the war on the productive economy decreased the amount of FX available in the country. [...] The split of the Central Bank of Yemen (CBY) into two branches associated with the rival parties to the conflict – the CBY-Aden under the control of the internationally recognized government and the CBY-Sana’a under Houthi authorities – has led to competing economic and monetary policies. [...] Due to the lack of regulatory oversight and the broader impact of the conflict, significant amounts of foreign exchange in Yemen continue to be spent on unnecessary luxuries and imported war materiel, or “lost” through ongoing capital flight, as evident in billions of dollars allegedly spent on foreign real-estate and the transference of business and manufacturing infrastructure abroad.[10] Within. [...] It is also important to note that any linkage of aid transfers to importers would not increase the amount of hard currency available on the market in Yemen, and therefore from a purely economic perspective wouldn’t strengthen the value of the Yemeni rial. [...] 13 TWO BIRDS WITH ONE STONE: USING AID TRANSFERS TO SUPPORT STABLE COMMODITY PRICES IN YEMEN Yemeni economic institutions and a lack of transparency A crucial part of any approach to linking aid funds to import financing is understanding the role played by Yemeni economic institutions in both Houthi- and government- controlled areas in managing the provision of FX reserves to traders.

Pages
17
Published in
Yemen

Creators/Authors