ID :
162356
Sat, 02/19/2011 - 20:09
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Shortlink :
http://m.oananews.org//node/162356
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Net government borrowing from commercial banks increases
WASHINGTON (Saba) - Net government borrowing from Yemen's commercial banks has increased markedly since
the start of the economic downturn in late 2008, according to the latest figures from the IMF's International Financial Statistics.
In 2006 the government was a net depositor in the banking system, but since 2007 state borrowing has picked up, with net claims on central government rising from YR74 billion
(US$370 million) at end-2007 to YR548 billion by 2009, as the global recession hit and oil prices dropped.
Although oil prices have since recovered, by the end of the third quarter of 2010 government borrowing had risen by a further 28 per cent, to YR702 billion. Borrowing by
parastatals (non-financial public enterprises) has also experienced growth of a similar scale, increasing almost tenfold since 2006, to YR102.5 billion by the end of September
2010.
However, worryingly, growth in lending to the private sector has risen at a far more genteel pace. Since end-2006, claims on the private sector have risen by 81 percent,
from YR260 billion, to YR472 billion, despite the prominence the government has placed in encouraging banking intermediation in order to promote private enterprise.
At the end of 2009, total claims on the private sector were equivalent to just 6.5 per cent of GDP. Comparatively, in Egypt the equivalent figure is 77 per cent and in Jordan
it exceeds 100 per cent.
The limited level of borrowing by the private sector demonstrates the highly restricted nature of the private economy, as well as the lack of sophistication in the banking
system (a function, among other things, of a lack of a credit-rating agency).
Yemen's loan/deposit ratios are low, somewhere between 25-30 per cent. Simultaneously, the rapidly rising level of borrowing by the government is also seemingly crowding
out lending to the private sector.
However, the Central Bank of Yemen (CBY) has at least managed to strengthen the regulatory structure, which has contributed to a sharp fall in non-performing loans (from
a peak of 33 per cent in 2002 to 13.9 per cent at end-2009) and an increase in the capital-adequacy ratio to 14.6 per cent.
In addition, although still in its early stages, microfinance is also becoming increasingly available, with some 50,000 borrowers across the country by March 2010.
the start of the economic downturn in late 2008, according to the latest figures from the IMF's International Financial Statistics.
In 2006 the government was a net depositor in the banking system, but since 2007 state borrowing has picked up, with net claims on central government rising from YR74 billion
(US$370 million) at end-2007 to YR548 billion by 2009, as the global recession hit and oil prices dropped.
Although oil prices have since recovered, by the end of the third quarter of 2010 government borrowing had risen by a further 28 per cent, to YR702 billion. Borrowing by
parastatals (non-financial public enterprises) has also experienced growth of a similar scale, increasing almost tenfold since 2006, to YR102.5 billion by the end of September
2010.
However, worryingly, growth in lending to the private sector has risen at a far more genteel pace. Since end-2006, claims on the private sector have risen by 81 percent,
from YR260 billion, to YR472 billion, despite the prominence the government has placed in encouraging banking intermediation in order to promote private enterprise.
At the end of 2009, total claims on the private sector were equivalent to just 6.5 per cent of GDP. Comparatively, in Egypt the equivalent figure is 77 per cent and in Jordan
it exceeds 100 per cent.
The limited level of borrowing by the private sector demonstrates the highly restricted nature of the private economy, as well as the lack of sophistication in the banking
system (a function, among other things, of a lack of a credit-rating agency).
Yemen's loan/deposit ratios are low, somewhere between 25-30 per cent. Simultaneously, the rapidly rising level of borrowing by the government is also seemingly crowding
out lending to the private sector.
However, the Central Bank of Yemen (CBY) has at least managed to strengthen the regulatory structure, which has contributed to a sharp fall in non-performing loans (from
a peak of 33 per cent in 2002 to 13.9 per cent at end-2009) and an increase in the capital-adequacy ratio to 14.6 per cent.
In addition, although still in its early stages, microfinance is also becoming increasingly available, with some 50,000 borrowers across the country by March 2010.
