By:Ahmed Abdu-Almalik, Yemeni journalist and writer
Sudden decisions of National Consensus Government in South Yemen for printing new amounts of illegal currency will affect badly in economic growth and destroy the currency price.
Printing money by governments or central banks is an economically complex technical process that should be avoided unless there is cash cover in the form of foreign currency, gold, or will be an increase in prices of local products and services, that is implying actual economic growth. So that cash printing is not just as a matter of paperwork, according to cash needs and exported from the Central Bank to the market for trading has real worth.
Generally, governments ought to stop printing new currency if their overall budget has a high rate of general deficit. In the situation of higher economic growth than expected, if the local currency has a high security rate and high rates of economic growth, there will be an increase in demand for savers and investors.
Therefore, governments and states persist to currency printing to make up for overall budget deficits, so printing currency without providing a cover of foreign exchange or gold will be a dangerous trend, and have a negative influence on income rates, investment, and economic activity.
Yemen’s predicament three years ago is a vivid example of this financial disaster. In the other instance, if the rate of economic growth increases, currency printing is required to keep up with the expansion, which has resulted in increased demand for the local currency.
Printing more money without a cover leads the national currency depreciating to a larger balance-of-payments deficit and a larger import bill. As a result, the printing of currency without cover is a disastrous process aimed at economic stability, and more broadly, livelihood. This indicates a lack of national responsibility as well as the willful, indiscriminate, and catastrophic use of the Central Bank’s functions in the law’s violation of the Central Bank of Yemen, which requires the Bank to maintain currency stability and prevent its decline.
However, Yemeni people can reduce the negative effects of unbacked currency by avoiding using it. Thus, their deals with that currency certainly leads to failing the value to lower of the national currency which reflects in the currency’s purchasing power. Therefore, this will have a detrimental influence on citizens’ lives and leads to a decrease in trade movement in local marketings.
