The paper highlights the profound transformations experienced by Yemen\u2019s banking sector during the years of conflict and examines the growing influence of the parallel market on financial and economic stability.<\/p>\n
The paper reviews two critical phases the Yemeni economy has gone through since 2014, beginning with the liquidity crisis and the decline in public confidence in the banking sector, and moving to the phase of monetary division and the emergence of dual exchange rates. These developments, the paper notes, contributed to the expansion of money exchange companies and informal transfer networks.<\/p>\n
According to the paper, the parallel market has become the primary beneficiary of policy gaps, capturing a large share of financial transfers and import financing, and increasingly performing bank-like functions such as currency speculation and building foreign balances, amid weak oversight and conflicting monetary decisions.<\/p>\n
The policy paper also warns of rising risks related to money laundering and illicit financing, along with the emergence of unregulated transfer networks that limit the Yemen Central Bank\u2019s ability to manage monetary policy and deepen financial fragmentation across the country.<\/p>\n
In addition, the paper examines the measures adopted by the Central Bank of Yemen after relocating its headquarters to Aden, including the printing of new currency, the launch of foreign currency auctions, the regulation of exchange companies, and the establishment of a unified remittance network, \u00a0while assessing the impact of these measures on reducing the dominance of the parallel market.<\/p>\n
The release of this policy paper comes as part of SEMC\u2019s ongoing efforts to stimulate public debate on key economic and financial issues, and to provide evidence-based recommendations to policymakers and relevant institutions in support of transparency and stability within Yemen\u2019s banking system.<\/p>\n