An initiative to address the monetary fragmentation in Yemen

An initiative to address the monetary fragmentation in Yemen

The Economic Reform Team (ERT) in Yemen launched an initiative to defuse the escalating crisis between the “internationally recognized” CBY in Aden and the Central Bank in Sana’a. This initiative aimed to find a mechanism to resolve the problem, including a positive response to the decision of the CBY in Aden to transfer local banks’ headquarters to Aden, and to maintaining local banks in the areas of control of the Houthi group and supporting its continued operation there.

The initiative reviewed at a Webinar organized virtually, via Zoom, by the SEMC and the ERT entitled “The Negative Repercussions of Monetary Division and Pacification tracks” included: Establish a set of specific criteria to ensure that the banking sector stays out of conflict and avoids further decisions and actions that undermine it, cause currency devaluation, and exacerbate Yemen’s humanitarian and economic crisis.

The Webinar came after the recent escalating crisis between the CBY in Aden and Sana’a following the CBY in Sana’a minting of a new 100-Riyal coins and the orders of CBY in Aden to transfer all local Yemeni banks’ headquarters to Aden. At the discussion, two key themes were discussed: the root causes of the monetary fragmentation and pacification tracks taken in this regard.

Dr. Motaher Al-Abbasi – Professor of Economics at Sana’a University – talked about the roots of the problem of monetary division from 2016 to the present, reviewing some important stations in the deterioration of economic conditions such as the cessation of gas and oil exports, the decline of foreign exchange flows and the disruption of state agencies, including tax and customs.

Dr. Al-Abbasi said that unilateral actions taken by CBY in Aden and Sana’a have deepened the monetary divide and exacerbated Yemen’s economic and humanitarian crisis. Among such measures are printing new currency in Aden, in 2019, imposing doubling tax on private sector and citizens in Sana’a, and lastly enacting a Law on the Prevention of Usury Transactions by CBY in Sana’a.

For his part, the Chairman of SEMC, Mustafa Nasr, reviewed the position paper prepared by the ERT which contained proposals to address the current crisis and mitigate the negative repercussions of the escalation between the two banks in Aden and Sana’a on the banking sector.

The Webinar, which was attended by a group of economists, members of the Economic Reform Team, bank representatives and academics, focused on an independent dialogue between the Central Bank of Yemen in Aden and Sana’a to come up with a solution that maintain and save the banking sector in the country, preventing collapse and bankruptcy of banking institutions in Yemen.

Click here to download the Paper