Raad Alrimi (South24) 

On April 7th, a three billion dollars joint Saudi-Emirati aid to Yemen was declared concurrently with the announcement that the Presidential Leadership Council (PLC) took office following the intra-Yemeni consultations held in the Saudi capital city Riyadh under the Gulf Cooperation Council's (GCC) sponsorship.

The declared aid included 2 billion dollars divided equally between Saudi Arabia and UAE to support the Yemeni Central Bank (YCB) in Aden. The last billion dollars announced by Saudi Arabia allocated 600 million dollars to buy oil derivatives and 400 million dollars for initiatives and development projects.

Although 8 months have passed since then and the advent of the new year 2023, the announced aid has not so far fully received except for one billion UAE dirhams which was transferred to the YCB on November 23rd as part of what was later known as "the Saudi-Emirati deposit".

Moreover, a new Saudi oil derivatives grant with a total amount of 200 million dollars was signed on September 29th. Additionally, on November 27th, an agreement to send 1 billion dollars Saudi-Emirati aid was signed between the Yemeni government and the Arab Monetary Fund as a technical body.

YCB's leadership previously announced in repeated statements that the conditions and the requirements of the Saudi-Emirati deposit were met. This came concurrently with trips and meetings between YCB governor and Saudi and Emirati officials.

Reasons of delay 

Economic observers blame the Yemeni government and the YCB for the delay in the arrival of the Gulf deposit at full. This is due to the lack of economic, financial and monetary reforms related to this move stipulated by Riyadh and Abu Dhabi.

Economic expert Mahdi Al-Khalifi told "South24 Center": "The reason behind the delay is basically attributed to the lack of required changes and reforms in the YCB".

"After what happened to previous financial deposits such as the 2028 deposit, KSA believes that the changes including the appointment of a new YCB governor and his deputy are not enough to make it eligible for the new deposit," he said.

"The Gulf actors have lately become smarter in the issue of deposits and financial grants as they have recently raised the ceiling of conditions to guarantee that they will take the right direction. What happened in the YCB is a nominal one by changing the head of the bank while maintaining the other important and pivotal departments" he added.

Al-Khalifi believes that the "absence of the positive impact of the previous deposits has pushed the Gulf actors who have humanitarian responsibility in Yemen to be more cautious before sending a similar deposit".

In exclusive statements to "South24 Center" by STC's Higher Economic Committee Center, it supported Al-Khalifi's point of view.

The committee said: "The declared Gulf aid has not arrived at full for many reasons, the most important of which is the manipulation related to the previous 2 billion dollars deposit which was transferred in several batches as of 2018 as a result of the spread of corruption within the legitimate authority's bodies at that time".

It added: "The reasons also include some governorates' refrain from transferring the central revenues to YCB such as Marib which behaves as an autonomous governorate in addition to Taiz".

The committee believes that "the absurdity of the appointments in the different state joints and paying their holders' salaries in foreign currency cast doubts about the current government's seriousness in using the deposit for the best interest of people and improving the economic conditions".

However, YCB Adviser and economic expert Dr. Yousef Mohammed said that he is optimistic about the arrival of the full deposit with the advent of the New Year 2023.

He told “South24 Center": "Positive developments related to the Saudi-Emirati deposit to support YCB’s foreign reserves could be very soon".

He indicated that “Minister of Finance and the Governor of the YCB are continuing their official visits which have taken too long but the more important is that work with the brothers is underway regarding this thorny issue".

He added: "Personally, through my reading, I am sure that with the advent of the new year 2023, we will hear about economic facilities and good news on more than one level and solutions to many related issues ".

Major handling

Economic experts agree that the full arrival of the deposit to YCB will contribute in boosting the latter's work and the value of the local currency. However, the deposit, according to them, won't be enough alone to apply major economic handling.

In this regard, Youssef Mohammed said: "As for the big treatment, the most important is to supply YCB with sufficient and sustainable money, but this won't be available without resuming oil exports which have been halted due to the Houthi attacks".

Meanwhile, according to him, "YCB wants to confirm that it has the tools and the needed foreign currencies to intervene in the exchange market and meet the export needs even at the short-term".

He added: "On the other hand, receiving the massive deposit will enable YCB to withdraw a larger part of Yemeni riyal excess liquidity from the market to the bank. This is very important as it will have a positive impact on the exchange rate stability".

The Economic Committee drew a link between improving the living and economic conditions of people with a set of measures which must be taken to achieve these goals.

The committee said: "We previously offered our vision in this issue. There are important measures which have to be made, foremost of which are restructuring of the Central Organization for Control and Accounting, the Anti-Corruption Commission, and YCB. A real structure l would eradicate corruption and corrupt elements".

The committee believes that "oil, gas and other central revenues should be transferred to YCB in Aden and closing any internal or external government bank accounts outside the framework of the YCB".

It added: "All absurd appointments should be reversed as well as reducing the personnel’s of government and the diplomatic missions to the minimum level in addition to the immediate halt of paying the salaries in foreign currency to those who stay in hotels and, homes abroad. Everybody who stays away from his job headquarters has to be dismissed".

The committee pointed out that "taking such internal measures along with the support of brothers and friends, especially KSA, and UAE would make the needed impact in the economic reality as well as improving people's life standards and getting out of the state of economic collapse".

Speculations 

According to the Higher Economic Committee "the economic conditions in the country during 2023 will be gloomier with the current imbalances and the lack of drastic and real reforms".

The committee said: "The prospects of the scene don't sound well and raise concerns. The International-recognized government expects that it will not be able to resume exporting crude oil from its areas of control and then sell it on the international market, and there are no clear indications that this problem can be resolved soon.”

It added: "The government seems not able to complete applying the economic reforms which it could support by revenues that help it to cover its costs simultaneously with suspending crude oil exports".

At the same time, according to the committee, "there are growing doubts about the feasibility of the strategy of the YCB leadership to manage and solve the financing crisis, and the ability of this administration to create a positive impact that contributes to containing the repercussions of these new changes".

The committee listed the most important expected economic repercussions during 2023 as follow:

1- The government will likely face a big deficit in the general budget in a way that undermines its ability to fulfil most of its duties towards people in the areas under its control. This included funding public services, paying the salaries of the public sector's employees regularly. These changes will increase the deterioration of people's living conditions.

2- The ability of the government to provide sufficient allocations to fund the operational cost of its affiliated different military and security entities is expected to decrease. Consequently, the government may face growing challenges at the level of securing the areas under its control and maintain the readiness level of its forces across the confrontation fronts against its Houthi rivals. This requires an urgent need to fix the big imbalance in the government's system including changing the head of the governorate due to his inability to achieve any noticeable success, especially at the economic level.

3- The local currency exchange rate within the government's controlled areas is likely to see a gradual decrease during the few coming weeks. This is due to the inability of the Central Bank in Aden to hold its weekly auctions to sell hard currency to importers in light of the suspension of the only source to fund these auctions which is the government's revenues from crude oil exports.

4- The gradual expected decline in the local currency exchange rate will have a negative and tangible impact on the living conditions of citizens in government-controlled areas. This is not a result of the decline of purchasing power but also due to the decline in the overall economic activity and the increase in inflation rates. Thus, this has affected the availability of job opportunities in light of the fluctuations of the exchange rate of the national currency against foreign currencies.

5- It is not unlikely that the decline of local exchange rate will score new low records If the government resorted again to the inflation funding sources (issuing new editions of local currency) to cover its costs like what happened over the past few years (2017-2021). This may cause more negative impact on people's living conditions and their resilience ability in the governorate-controlled areas.

The committee noted that “the expected economic reality in South Yemen in 2023 can't be separated from the current situation at the local and global levels.

It concluded that "the current international circumstance, the deadlock resulting from the Russian-Ukrainian war along with its negative impact on the global economy, the ongoing 8-year state of war, the official laxity in fighting Iran and the Houthis and the focus on dominating the wealth of South Yemen and its economic resources will cast a shadow".