Yemen may lower its benchmark interest rate of about 20 percent to boost lending in the Arab nation, which ousted its President last year, central bank Governor Mohamed Awad Bin Humam says.
“We will go about it progressively,” Bin Humam said in Kuwait City today. “Maybe it should be reduced to stimulate lending.”
The nation, which received $500 million from Qatar to fund development, still needs $3 billion in foreign aid to fund projects over the next three years, in addition to the $6.4 billion in pledges it got in Riyadh in September, Bin Humam said. The U.S. has more than doubled its aid to Yemen this year to $345 million, said Rajiv Shah, administrator of the U.S. Agency for International Development.
Yemen’s economy shrank 10.5 percent last year, according to the International Monetary Fund, more than anywhere in the world bar Libya, where a civil war halted oil output. Crude production in Yemen also slowed, with repeated attacks on the Marib oil pipeline, and the country suffered regular power shortages as its budget plunged into deficit. Yemen’s consumer price index declined 3.5 percent this year, Bin Humam said.
The nation, which raised 50 billion riyals ($233 million) from the sale of sukuk in April, has no plans to issue more Islamic bonds, Bin Humam said.