Yemen Central Bank announced earlier this week that despite its best efforts the country's annual inflation rate had continue to creep up, this time to reach a 16-month high of 14.5%, well above previous estimates.
The International Monetary Fund (IMF) forecast in April that Yemen's inflation would average 7.5% in 2013, down from 10.2% in 2012.
Back in April the annual inflation rate had already surged to 14%, a serious increase from February 11.3%.
Historically, from 2006 until 2013, Yemen inflation rate has averaged 11.71%; reaching an all time high of 24.77% in October of 2011 and a record low of 1.10% in March of 2009.
YCB explained on Monday that Yemen's inflation has been fueled by a rise in Qat prices (a mild leafy green stimulant which a majority of Yemenis consume regularly) as well as tobacco prices. In addition, a drop in foreign currency reserves also significantly contributed to the phenomenon, putting a strain on Yemen's broader economy. "Foreign currency reserves dropped to their lowest level for nearly a year in July," reported officials at Yemen Central Bank.
Mohammed Bin Humam was quoted on Monday by Reuters as saying, "The bank will need to watch inflation before deciding whether to reduce borrowing costs again." He added, "The headline inflation figure was expected to decelerate to around 6-8 % by the end of this year."
Unless Yemen manages to rein in its inflation levels, its economic recovery and growth will be severely hampered. Following months of economic and financial contraction Yemen needs to break away from its vicious cycle by infusing some fresh funds into its system.
Without some form of economic stimulus, Yemen's economic output is likely to worsen.
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