Thursday, April 25, 2013

Yemen c.bank FX reserves hit 6-mth low as bombings hit oil exports

* Gross reserves fall to $5.8 bln in February

* Oil exports drop 30 percent from January

* Yemen hit by oil pipeline bombings

* Inflation at 5-month high of 7.1 pct y/y in January

By Martin Dokoupil

DUBAI, April 14 (Reuters) - The foreign reserves of Yemen's central bank shrank by $457 million in February to their lowest level since last August as oil exports from the impoverished Arab country plunged by a third, data showed on Sunday.

The Arabian peninsula state, which relies on crude exports to replenish its reserves and finance up to 70 percent of budget spending, has suffered from frequent bombings of its main oil pipeline since political turmoil started in 2011.

Gross foreign assets held by the central bank fell to $5.8 billion in February, covering 5.9 months of imports, from $6.2 billion or 6.4 months of imports in January, central bank data showed. Net reserves, which factor in the central bank's foreign obligations, stood at $4.5 billion in February.

The central bank, which received a $1 billion loan from Saudi Arabia last year to support its reserves, did not explain the decrease in its monthly bulletin.

In March, its vice governor told Reuters that reserves of $6.2 billion were appropriate, but that the level would depend on whether Yemen continued to suffer pipeline bombings by Islamist militants and disgruntled tribesmen.

Attackers blew up parts of Yemen's main 110,000 barrel per day oil export pipeline in February and March, halting the flow of crude. Another explosion occurred earlier this month, only two weeks after the pipeline was repaired.

A long closure of the line last year forced Yemen's largest refinery at Aden to shut, leaving the country dependent on fuel donations from Saudi Arabia and imports.

Yemen exported $210 million worth of crude oil in February, a drop of more than 30 percent from January, the data also showed. The government's share of those exports was 1.8 million barrels in February, the lowest level since May 2012.

In January, the International Monetary Fund warned that the political transition following the overthrow of President Ali Abdullah Saleh in February 2012, and security concerns - particularly attacks on key oil and electricity facilities - threatened the economic outlook.

Yemen's economy improved last year but its recovery remains fragile in the second-poorest Arab state after Mauritania. A third of Yemen's 25 million people live on less than $2 a day, and unemployment is estimated at around 35 percent.

Last year wealthy Gulf Arab states, Western governments and other donors pledged $7.9 billion in aid over several years to Yemen, but only a small fraction has so far arrived.

The IMF said earlier this month that it was discussing fresh financial aid to Yemen, which a central bank official said could be as large as $500 million.

The country faces a fiscal deficit of 6.0 percent of gross domestic product this year, the IMF has forecast, more than the 5.7 percent estimated for 2012.

Inflation in Yemen picked up in January, climbing to 7.1 percent on an annual basis, the highest level since August 2012, from 5.8 percent in December, the central bank data showed.

The central bank has cut its key interest rate by 5 percentage points to a three-year low of 15 percent since October 2012 to spur the economic recovery, after the rial currency stabilised at about 214 to the U.S. dollar and inflation fell from a peak of 25 percent in October 2011.

The governor of the central bank said earlier this month that he was comfortable with the current level of interest rates and that he expected economic growth to accelerate to about 7 percent this year from 4.5 percent in 2012.


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