The Central Bank stopped organizing the weekly auction after October 31, 2023, without announcement, to allow time for the Board of Directors of the Central Bank, experienced economists and the organizing company to further study and evaluate the experience of auctions during the last . period, after the dollar rose above the acceptable level. This happened and still happens in environmental conditions.
An extremely complex and difficult economic and political situation, as a result of the continued cessation of income from oil exports, which supplied the general budget of the state with approximately one billion and one hundred million dollars annually, and the decrease in income of the Port of Aden by rate that can reach approximately 70 percent as well.
It is clear that from the end of the second half of 2021, the Central Bank of Yemen in Aden approved the auction process to sell the dollar through the electronic platform through the international electronic auction company “Refinitiv”, where the central bank determines the weekly auction value and the company manages the auction process through the electronic platform with the participation of commercial banks, which is a Transparent means that leaves no room for doubts or confusion about the effectiveness of the sales operations regulated by the Central Bank.
The purpose of the process of organizing the auction was to provide the need of the business sector for dollars, through regional and international support, to meet the import of basic goods, medicine, and other commodities, thus reducing the pressures of market demand for the dollar due to import, at the same time trying to curb speculation in it for enrichment and profit, and by extension, to manage exchange rates and keep them within safe limits. Apart from the gradual withdrawal of the excess money supply from the market. through the banking process that is arranged after each weekly auction process.
The Central Bank succeeded, through the process of selling the dollar, which so far reached perhaps more than two billion dollars, to control the exchange rates and achieve, in a previous period, to a large extent, the relative stability of the exchange. duty
However, the process of importing petroleum derivatives, which represents a large part of the import bill, continued to depend on the market to provide foreign currency, thus raising the demand for the dollar in the market and increasing the amount of pressure on scarce resources, in addition to the persistence of a large percentage of illegal speculative operations on the dollar, which are carried out for reasons of enrichment. And profit in the currency market.
The Central Bank worked to control speculative operations and try to pressure exchange companies speculating in dollars by presenting them to the prosecutor and judiciary with documented evidence. But as everyone knows, the judiciary had a different position, as if it supported the speculators without realizing that this causes serious damage to the public interest of the people. In the meantime, a large media campaign was organized targeting the Central Bank and questioning the effectiveness of its procedures, and it was conducted in an emotional way… in the absence of any real awareness of the role, tasks, and tools of the Central Bank.
This situation, in addition to the absence of a political solution to the crisis and the economic conditions, which remained as complex and difficult as they were, did not leave any room for the market and traders to be able to predict the future and feel a degree of security and lack of fear together with the weakness of external economic support and the failure of some donor countries to fulfill their obligations in parallel with the political turmoil. The external factors that the region is still experiencing, especially the events in Gaza and their interaction with the Yemeni situation. All these factors combined, and perhaps others, were directly and negatively reflected on the exchange rate, especially with the increasing scarcity of the dollar and the Saudi riyal and the persistence of forms of speculation on exchange rates.
Therefore, it was important for the Central Bank to temporarily stop operations of selling dollars in order to study and evaluate the experience of selling the dollar through the electronic platform during the last period. It is certain that the Central Bank will resume operations of selling dollars , but perhaps through another mechanism that takes into account the result of the evaluation that took place and the variables that accompanied it. Experience the operations of dollar sales auctions through the electronic platform.
Dr. Youssef Saeed Ahmed