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Yemen’s central bank raises interest rates to shore up riyal

Gulf Arab Region | 2018-09-19 23:03:00
Yemen’s central bank raises interest rates to shore up riyal
The central bank of war-torn Yemen has raised interest rates on deposits to an all-time high of 27 percent in a bid to stabilize the plunging riyal that caused food prices to soar. The bank also raised interest rates on government bonds to 17 percent from 12 percent and banned taking out of Yemen more than $10,000 without a prior permit, the official Saba news agency reported.

Previously the interest rate on deposits was 17 percent, according to the Facebook account of the central bank run by the internationally recognized government.

The move is aimed at strengthening the riyal and reducing skyrocketing inflation.

Since the start of an Arab military campaign against Iran-backed Houthi rebels who control the capital in March 2015, the riyal has lost more than two-thirds of its value.

The Yemeni currency has dived more than 36 percent since the beginning of the year despite Saudi Arabia placing a $2 billion deposit in the central bank, now based in the government’s temporary capital of Aden.

The slide in the value of the currency has triggered a sharp rise in the prices of commodities, especially food and fuel.

Yemen’s government in January issued its first budget in three years, projecting a $1.3 billion deficit.

The high cost of living sparked widespread protests in South Yemen in early September that were met by the government raising salaries by 30 percent.

The U.N. Office for the Coordination of Humanitarian Affairs said Monday that currency depreciation is likely to make another 3.5 million people food-insecure, in addition to 8.4 million people who need emergency food assistance.

The charity Save the Children warned Wednesday that more than 5 million children are at risk of famine in Yemen.

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