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|Economist: Current Financial Crisis to Affect Yemeni Economy|
Hakim Almasmari ( YEMEN POST
Article Date: October 13, 2008
Economy professor Abdullah Al-A'dhi told the Yemen Post that the current financial crisis across the world, especially in America, will directly affect the Yemeni economy which is directly tied to the U.S. Dollar.
Al-A'dhi continued that the disengagement from the U.S. Dollar could reduce the direct effects on the country's economy as the value of dollar is falling before European currencies, particularly the Euro, stressing that we should diversify our basket of currency.
"Yemen will get directly affected by the fall of the U.S. dollar because the country's exports, mostly oil, are sold in this currency. Any forced devaluation of the U.S. Dollar will devalue the exports," said Al-A'dhi.
He added that the biggest fault in Yemen is that the country relies greatly on oil, and any fall in its prices will directly or indirectly affect other sectors in the country, advising that the country should diversify its products and exports so that the fall of any commodity would not affect the overall economy.
Deputy Finance Minister Abdullah Al-Mikhlafi on the other hand told official media that Yemen will not get much affected by the ongoing world financial crisis, hinting the effects are very limited.
Al-Mikhlafi added that this is because Yemen has limited investments in America and further has no stock market; however, the fall of oil prices and dollar value could badly harm the Yemeni economy as oil exports makes up some 90 to 95 percent of the country's exports.
He also stressed that concerned authorities at Finance Ministry and the Central Bank of Yemen should conduct profound studies to assess properly the possible effects of the world crisis on the Yemeni economy so that they can take the required measures to avoid or lessen it.
Though most experts believe that Yemen's banking industry will not get affected by the current financial crisis because the country has no stock market, local banks started to voice their fears over the ongoing international crisis, assuring it could indirectly affect the banking industry.
These fears were clearly shown in a recent appeal letter sent by the Yemeni Company for Collecting Bad Debts to President Saleh on their behalf. The company requested Saleh to force state institutions to settle their debts with four commercial banks including CAC Bank, Yemen and Kuwait Bank, Yemen and Gulf Bank and the Watani Bank, now under liquidation.
Meanwhile, a recent report by the World Food Program, mentioned that Yemen is among the most affected countries by the price hikes and added that prices remain high for common consumers though the prices went down.
The report also indicated that Yemeni poor families have been forced under the current hikes of prices to spend over 65 percent of their budgets on food commodities at the risk of expenses on education and health, maintaining that they have less food with poor quality.
Seeking to ease the situation affecting millions of poor Yemenis, WFP launched a prompt campaign costing $30 million in eight provinces to cover food needs for the poor.
Though it is located in the oil rich Gulf, Yemen is ranked 153 out of 177 on the Human Development Index of 2007-2008. Half of its population live under poverty line and suffer widespread unemployment and illiteracy.