By: Adel Al-Ali & Mohamed Nasser
In the current March 2022, it was the due time to repay the deposit amounted at two billion dollars, provided by the Kingdom of Saudi Arabia to the Central Bank of Yemen.
However, the latter demanded a new deposit, after the bank was unable to pay off the previous deposit, whose disbursement was accompanied by major breaches and several violations of the approved banking rules. This limited its economic effectiveness, and exposed the fixed assets of the Central Bank outside Yemen to the risk of confiscation in accordance with the deposit agreement, which also included unfair provisions against the Yemeni state, according to what this investigation will reveal.
In November 2021, the United Nations warned of the deterioration of the value of the Yemeni riyal against foreign currencies in the areas under the control of the internationally recognized government, which threatens to worsen the living, economic and humanitarian conditions in the country, which can no longer tolerate more.
The collapse of the Yemeni currency left a new, more tragic situation in the lives of Yemenis, after their wages and savings vanished, and the prices of goods, foodstuffs and the costs of the services rose to record levels that pushed more Yemenis to live below the poverty line.
Obviously, the deposit provided by the Kingdom of Saudi Arabia in the first quarter of 2018, to the Central Bank of Yemen, aimed at maintaining the stability of the national currency and supporting imports of number of commodities and foodstuffs. However, the failure to optimally utilize the deposit along with the violations that accompanied the spending operations prevented the realization of its objectives, which were confirmed by economists and based on the documents obtained by the authors of the investigation reveal.
On March 15, 2018, a signing ceremony took place in Riyadh in which a Saudi pledge of two billion dollars that the Kingdom will be providing to Yemen announced.
The minutes of the deposit - which was considered a confidential document according to its contents - were signed by the Saudi Minister of Finance, Mohammad bin Abdullah Al-Jadaan, and the governor of the Central Bank of Yemen at the time, Muhammad bin Mansour Zammam.
One of the most important goals of the deposit was to support the financial and economic condition of Yemen and reinforce the stability of the Yemeni riyal exchange rate through financing imports of basic foodstuffs, and relieving pressure on the demand for foreign currencies traded in the local market.
However, none of these targets was achieved, and throughout the period of validity of the Saudi deposit, the Yemeni riyal continued to deteriorate until it recently reached record and unprecedented prices in the history of Yemen.
A real depletion of the deposit by traders and import companies under the pretext of importing only five main commodities, as confirmed by the report of the Ministry of Trade and Industry, talks about a decline in the import of a number of foodstuffs during the years 2018, 2019 and 2020.
In fact, the value of the Yemeni riyal against the US dollar when the Saudi credit was deposited in March 2018 was 490 for 1 USD but the riyal exchange rate continued to decline threefold, reaching in November 2021, during the validity of the deposit, to more than 1,500 riyals.
So what happened? And how was the Saudi deposit, which did not achieve the minimum declared goals, was dealt with?
Documented evidences for disbursing greater amounts than the value of the credit
The authors of the investigation reviewed local and international reports about corruption practices that accompanied the spending of the Saudi deposit where a lot of rumors and missing links which resulted in a kind of uncertainty about the whole truth.
The UN experts’ report, which was submitted in January of last year to the UN Security Council, included accusations of corruption and money laundering of the government, the leadership of the Central Bank of Yemen and food importers, which said caused the embezzlement of 432 million dollars out of the two billion dollars of the KSA deposit.
However, the UN team retracted some of the accusations of corruption and money laundering contained in its report, less than two months after its submission to the Security Council, specifically on March 30, 2021.
Moreover, the report of the Special Parliamentary Committee in charge of evaluating the conditions of the Central Bank issued on March 20, 2021 revealed massive corruption and waste of YRs 89.1 billion Yemeni riyals from deposit allocations through 38 violating operations, which included lowering banking rates for documentary credits that were granted deferred payment facilities.
The authors of the investigation traced this waste to “Khuyut” to find out what happened and how it was done.
The authors of the investigation report obtained several documents, which have been published by Khuyut, that reveal great corruption included the payment of large amounts of the deposit to merchants.
In addition to the huge difference between the actual exchange rate of the dollar against the riyal, and the rate offered by the bank, amounts greater than the value of the credit presented were being disbursed, according to official papers.
On October 25, 2018, the amount of the credit for importing “cooking oil” specified in the deposit agreement was $2,760,000. But what was actually disbursed, according to written directions on the same document by the then Deputy Governor of the Central Bank, Chakib Habeishi, was $2,898,000; A difference of 138,000 dollars. (Document No. 1).
In another document, with the same date and the same importing party, the amount of 2,176,650 dollars was approved, while the amount of credit in the official documents is 2,073,000 dollars; A difference of 103,000 dollars. (Document No. 2).
This was also repeated on November 12, 2018, when a credit of $2,055,344 was disbursed for a supply operation, according to official documents, worth $1,868.495, with a large difference of $187,000. (Document No. 3).
These are many samples of large differences between the value of the real credit and what was actually disbursed, and by examining the investigation preparers for spending operations, from operation No. (1) to operation No. 11, with the help of Yemeni financial analyst Rashid Al-Ansi, advisor to the former central bank governor in Aden, it became clear that there is a difference of $ 12 million within a short period of no more than four months (from October 25, 2018 to January 5, 2019).
The investigators tried to communicate with the Deputy Governor of the Central Bank of Yemen, Shakib Hubeishi - who was dismissed during the preparation of this investigation - and asked him to clarify the differences that appeared between the amount of the credit and the amount actually spent, but he refused to respond, and the bank's media office said, that there is an international company that has been appointed by the government to audit the bank accounts and scrutinize deposit funds.
In early February, the Yemeni government announced the selection of an international company to review and audit the accounts of the Central Bank of Yemen on the background of accusations of major corruption accompanying the Saudi deposit spending operations. The government said at the time that the selection process ended with contracting Ernst & Young Company.
However, after more than ten months, no results have been published on the findings of the aforementioned international company. This was considered by economists as an affirmation of the lack of transparency, and an attempt to cover up corruption deals that accompanied the disbursement of the Saudi deposit.
Furthermore, this was confirmed by the head of the Economic Media Center, Mustafa Nasr, who told "Khuyut" that the secrecy surrounding the results of the auditing company's findings and its loss in the corridors of uncertainty, puts big question marks about the powerful lobbies behind what happened inside the Central Bank of Yemen during the past years and the operations that accompanied the disbursement of the Saudi deposit.
Squandering
According to the bulletin of the Central Bank of Yemen and its comparison with the price circulating in the local market, there was a clear manipulation of the exchange rates of the riyal against the dollar, as the bank was offering preferential prices to traders with a large difference from the real price in the local market.
Furthermore, the economic researcher, Abdul Wahed Al-Aubali, said that the management of the Central Bank of Yemen squandered the deposit and treated it as if it were an irretrievable gift, by offering preferential exchange rates to traders and importers of basic commodities, with a large difference from what is in the markets. He added, "The difference reached at the end of 2018 and during 2019, about 200 riyals per dollar. This is money laundering. It is no longer legal or normal banking. It is a clear waste of the deposit and a dissipation of its importance."
By reviewing the documents obtained by the authors of the investigation and the report of Parliament and the Central Organization for Control and Accountability, it became clear that there was a great waste of deposits by setting unrealistic banking rates. Where the Central Bank adopted varying exchange rates to finance the import credits of food commodities included in the deposit agreement, which started at an exchange rate of 497 riyals per dollar in mid-October of 2018, then the riyal value deteriorated up to 585 per dollar and returned to 570, and quickly fell to 440 riyals for each dollar at the beginning of December 2018. This exchange rate remained fixed for a long period and with a large difference from the local market exchange rate varied between 110 and 195 riyals; This led to the depletion of a large proportion of the deposit funds.
The investigator went to the Central Bank to ask about the reason for offering preferential rates to merchants and import companies. The bank officials said that the aim was to maintain the Yemeni riyal exchange rates against foreign currencies.
Furthermore, the bank's media center defended this step, saying that this policy led to a decline in the dollar exchange rate from 800 riyals to 450 per dollar in December 2018, adding that "the bank does not have a magic wand to preserve the value of the local currency."
Back in October 2018, the investigators found that the exchange rate of the dollar against the Yemeni riyal had already reached about 830 riyals, and after the Saudi deposit took effect, the Central Bank of Yemen in Aden issued a decision setting the exchange rate of the dollar against the Yemeni riyal at 450 riyals. The Governor of the Central Bank, Dr. Muhammad Zimmam, attributed the improvement in the price of the Yemeni riyal at the time to a number of factors, including the covering basic materials expenditures from the Saudi deposit.
However, the exchange rate set by the bank at the time was not realistic, which was confirmed by the report of the Central Organization for Control and Accountability, which said that the exchange rate used to finance imports from the deposit was (440 riyals) against the dollar through the employment of market interventions (Buying and selling currencies) to cause an accelerated and unrealistic devaluation of the foreign exchange value of the riyal. This was reflected in the instability of the exchange rate of the riyal set by the bank, as the exchange rate did not last long below the rate of 500 riyals / dollar, only five days, and under the rate of 460 riyals it lasted only one day, reaching the exchange rate of 440 riyals per dollar, which is the highest depletion rate of the deposit reserve.
The Central Bank's report and accounting spoke that the Central Bank's leadership deliberately created a value gap between the market exchange rate and the exchange rate used in Saudi deposit expenditures to liquidate the ancient bank accounts of the Central Bank of Sana'a, and use it in repaying appropriations instead of cash payment.
The Central Organization for Control and Accountability Report No. (51) issued on March 17, 2019, regarding the evaluation of financing operations for documentary credits used from the Saudi deposit reserve, said that the total operations of the Central Bank in employing the reserve of hard currencies in financing the credit and direct intervention in open market operations. As a result, more than 61 billion Yemeni riyals were wasted from the equivalent of used foreign reserves during a period of only four months, specifically the period between October 13, 2018 to February 13, 2019.
Further, the report explained that the bank during this period used an amount of $445,107,184 from the Saudi deposit, at a conversion rate to local assets in riyals (210,897,967,956) riyals, while the assumed equivalent amount of domestic monetary assets in riyals for foreign reserves according to market prices during the same period was (259,574). 523.344) riyals, with a waste decrease of (48,676.545.388) riyals.
Moreover, during the same period, according to the report of the Central Organization for Control and Accountability (COCA) submitted to the Prime Minister, the Central Bank financed other credits of self-resources with a total value of (31,102,921) dollars, which were sold to banks at the equivalent of (14,911.493,659) riyals, while the real value according to market prices in the same period was equal to (17,666,854.448) riyals, with a loss of (2,755.363.789) riyals.
The COCA also, and in a report No. (32) dated in February 10, 2019, also revealed a squander carried out by the Central Bank in the last quarter of 2018, amounting to (9,873,887,200) riyals. The COCA considered that all this loss of public money requires taking legal measures to recover public funds and hold officials accountable for useless spending.
In addition, the number of traders and import companies that benefited from the deposit funds reached 133 firms and traders which have received financial support from deposit funds at $ 1.835,680,730, according to the report of the annexed parliamentary committee. A preferential detailed prices have been paid to provide further funding requests for importation. The beneficiaries of the documentary credits of Saudi deposits, have not been a trading or importer of food, as has been confirmed by a document issued by the Ministry of Industry and Trade.
On April 4, 2020, the Ministry of Industry directed a memorandum to the governor of the Yemeni Central Bank at the time, Mr. Ahmed Obaid Al-Fadhli, and the letter has stated that many beneficiaries of the bank's support, which received documentary credits, did not have files in the ministry and that the ministry has no information about it.
For his part, Vice President of the General Federation of Chambers of Commerce and Industrial and Industrial Chambers of Commerce and Industrial Chambers in Decan, Abu Bakr Bakr, ignored the representation of the General Federation of Chambers of Commerce and Industry in the Board of Directors in accordance with the law. He also criticized the leadership of the central bank, which has managed Saudi deposit, and said it refused to respond to any government party and that they were aiming to circumvent. Badabid told the parliamentary committee on 23 February 2021 that the depositary's goal of supporting food security was not achieved and that equivalent to the Yemeni riyal from the value of Saudi deposit paid by the traders in cash is not in recorded within the central bank accounts.
The opinion of the current Bank Governor
The investigation reporters tried to communicate with the current governor of the Central Bank, Ahmed Ghaleb Almqaki (who was appointed on December 6) but his office apologized because of the engagement of the bank's governor with other tasks. However, the investigation reporters have been briefed on the Governor's opinion, which was included in the report of the parliamentary committee on 18 February 2021 when he was presiding over the National Committee for Combating Money Laundering and Terrorism and a member of the Yemeni Economic Commission.
Where Mr. Al-Mabaki revealed that the Central Bank administration sells two Saudi deposits at 380 riyals for the dollar stressing the lack of commitment of the Bank management then, with the regulations of Saudi deposit that he described, "mismanagement in light of clear imbalances witnessed."
Al-Mabaki has also criticized the lack of involvement of the Ministry of Commerce and Industry in the control process on imported goods and review of funding requests before approving it. He further condemned the lack of transparency of previous leadership of the central bank.
He has also criticized the lack of involvement of the Ministry of Commerce and Industry in the controlling and monitoring process on imported goods and the mishandling of the funding requests before approving it. He further condemned the lack of transparency of previous leadership of the central bank.
Contradictions
The Saudi deposit has been allocated to finance five major goods; They are: (wheat, rice, sugar, milk, cooking oil), and during 18 months (October 2018, to April 2020), these goods drained $ 1.89 billion, from the deposit amount, although the deposit exempted another number of importers, specifically in the capital Sanaa for political and security reasons, which means that these traders also imported goods covered by the deposit agreement, which also means that the import numbers of these goods covered by the depositary agreement are supposed to increase no to decrease. Additionally, it reveals a real depletion of deposit by traders and import companies under the importance of importing five major goods as confirmed by the report of the Ministry of Commerce and Industry, which speaks of a decline in the import of a number of food products during 2018, 2019, 2020.
The Central Bank of Yemen has not asked for customs data before financing their imports, according to the former consultant of the Yemen's central bank governor and the Yemeni financial analyst Rashid al-Annessi, who said the bank alerted later, specifically in the second half of 2019, but when the Bank requested customs data from traders for the previous period it hasn't been provided.
Regarding the reasons behind the ignorance of such critical required procedure by the Bank's administration, Mr. Ansi said in his statement to "Khuyut". "When the central bank was moved from Sanaa to Aden, the bank specialized staff were not transferred to Aden. As a result, the new the bank in Aden continued to work with the branch staff which led to numerous breaches due to the lack of competences".
This was confirmed by the President of the Center for Economic Media, Mustafa Nasr, who said the central bank management of the Saudi deposits reflected the poor administration of the Central Bank in general and the absence of transparency in the allocation and disbursement of these deposits and credits provided to traders to support the import of basic living materials.
According to Mustafa, one of the most major violations is to manipulate these amounts and disburse it to import items that were not among the five key goods that have been allocated by the Saudi deposit for funding. He said that "the deposit was used to import poultry and medical supplies, which was confirmed by the parliamentary report, which also stated that (11.7%) of depositary funds went to finance other imports that violate the Yemeni cabinet resolution, which limited the expenditures by five items (wheat, sugar, rice, Children's milk, cooking oil)".
Today, we are the outskirts of the duration of deposit, the Yemeni Central Bank stands unable to pay; Because of the bank's deficit for collection of these funds due to the lack of commitment of the bank with a policy of replenishing the spent amounts of deposit, according to economics.
Mustafa Nasr added in his speech for "Khuyut": "There are specific banks and companies accounted for depository funds, and there is foggy accompanied the expenditures which led to very tremendous differences that were wasted from the deposit."
Mustafa Nasr confirms there are many mistakes and corruption issues that require a transparent and commercial investigation to reveal missing episodes in this barbed file. Mustafa has also confirmed that there are many mistakes and corruption issues that require a transparent and fair investigation of revealing missing episodes in this barbed file. He stressed the need to be accounting for everyone who committed to these amounts as general funds.
Mustafa concluded that deposit is one of the examples of deficit and the absence of good governance of the Yemen Central Bank over the past years. It also reflects the leadership failure at all levels, economic and political: "The problem lies not in the central bank alone, but in the government and the Ministry of Finance, and also the presidential institution as everyone is responsible for this waste."
Unfair articles
Today, we are the outskirts of the deposit repayment, the Yemeni Central Bank stands unable to pay; because it failed to collect the funds, due to ignorance of replenishment policy of the amount of deposit, according to economics.
Thus, unless Saudi Arabia has extended the duration of deposit, the fixed assets of the Yemeni Central Bank abroad are threatened with confiscation, according to the depositary agreement obtained by investigation reporters, which also states that the Saudi judiciary is only authorized to decide on any legal proceedings with the Central Bank of Yemen.
The agreement, which was considered confidential, has been folding, and its content has been detected.
When the Yemeni parliament formed an investigation committee to investigate the corruption of the Central Bank of Yemen with the deposit on 31 January 2021, the Bank's leadership denied cooperation with the Parliament Committee.
The investigation reporters managed to meet with the parliamentary committee who said that the central bank's leadership refused to respond to parliament's request for clarification and rejected cooperation with it.
When asked about unveiled items for the depositary document, a member of the Parliamentary Committee, who was asked not to be identified due to the sensitivity: "We asked the central bank for a copy of the depositary agreement, but the bank's leadership refused." The content of this secret document is a real violation of the sovereignty and reputation of the Central Bank, a clear violation must be investigated.
The MP parliament concluded his statement to "Khuyut" saying that it is critical to hold accountable any official proved to be involved in the squander of the Saudi deposit and to be referred to the judiciary for trial, on top of those, the Board of Directors of the Bank and announcing the outcomes of this trial to the public;
The funds that have been squandered are funds of the Yemeni people which has been disbursed in non-interests of the Yemenis.
