News analysis: relocation of Central Bank of Yemen dangerous but inevitable

Yemen's internationally recognized President Abd-Rabbuh Mansur Hadi on Sunday appointed a new governor for the Central Bank of Yemen as a prelude to relocate the bank from the Houthi-controlled capital Sanaa into the temporary capital Aden, which is viewed by observers as dangerous but inevitable.

The appointment of Monasser Al Quaiti, former finance minister, comes as the national economy is continuing to suffer after 18 months of civil war and Saudi-led military operation and embargo.

Though it reflects concern of the legitimate government over the devastated national economy, observers argued that the decision to relocate the Central Bank is very dangerous.

The relocation requires vigorous measures, said Mustafa Nasr, head of the Yemeni Studies and Economic Media Center, adding that "it is the most dangerous decision taken since the war began."

He said that there will be consequences in case the government fails to "improve its performance and coordination for getting enough support from regional and international donors."

He pointed out three key requirements for this move to succeed: firstly, political and security stability; secondly, resuming trade and economic activities, and thirdly, return of the government to Aden.

He also noted that countries within the Saudi-led coalition are supposed to "provide direct financial support either as deposits to buy basic supplies or for wages and operating expenses."

Faisal Al Hothaifi, an economist, wrote in his Facebook post that the relocation remains a test.

The government should take effective measures including "taking control of all ports to prevent the Houthis from imports and bringing in any revenues for their war budget," he said.

"People wants to feel the government is there and efficient," he noted, fearing that the public will have no option but come back to the Houthis "if the government fails to do something."

HOUTHIS ACCUSED OF ILLEGAL SPENDING

The Houthis have reportedly failed to pay salaries to all employees in recent months as they have continued to squander money on wars in Yemen and on the border with Saudi Arabia.

The bank had been controlled by the Houthis but stayed impartial during the crisis and war under a deal with the government and the international community. It continued to pay salaries to all employees including pro-government ones since the militants seized power in late 2014.

However, the illegal spending by the Houthis from the bank reached 1.8 billion U.S. dollars in 18 months, said Al Quaiti, the new governor of the bank, at a press conference in Riyadh on Monday.

"The foreign exchange reserves, including one billion dollars in Saudi deposit since 2011, declined from 5.2 billion dollars in September 2014 to less than 700 million dollars by August this year," he added.

Moreover, the relocation decision was also made after the bank's management failed to act impartially, with the government accusing the Houthis of depleting the bank resources.

ECONOMY ON BRINK OF MELTDOWN

All foreign investments and most of local investments came to a halt after the Saudi-led coalition launched the bombing campaign in March 2015.

Yemen depends largely on foreign investments with oil and gas revenues contributing more than 70 percent to its budget resources, and the acute shortages caused by embargo have forced the rest of local investments to keep struggling.

As a result, poverty and unemployment rates increased and basic services deteriorated largely. The United Nation figures indicated that around 85 percent of the total population, over 22 million, are in need of basic aid.

Moreover, the UN says around 7.6 million people have now become one step from famine as fund shortages and the blockade deprived the country of almost all supplies.

Observers said neither the Yemeni factions nor the international community gives sufficient attention to the economic situation in the country.

Adel Al Shuja'a, a politics professor at Sanaa University, said that "the ugly truth" is that the Yemenis and foreigners are being focused on war, while people are starving and national economy collapsing. Endit