Yemen, officially the
Republic of Yemen is a country located on the Arabian
Peninsula in Southwest Asia. It is bordered by Saudi
Arabia to the north, the Red Sea to the west, the
Arabian Sea and Gulf of Aden to the south, and Oman to
Yemen's land area is just under 530,000 km2 (204,634 sq
mi), and its territory includes over 200 islands, the
largest of which is Socotra, about 415 km (258 mi) to
the south of mainland Yemen, off the coast of Somalia.
Yemen is the only state in the Arabian Peninsula to have
a purely republican form of government. Its capital is
Islamic Banks in Yemen
Saba Islamic Bank
Saif Bin Thi-Yazen St.
+967 1 276337/8 286505
+967 1 286505
Tadamon Islamic Bank
Al-Zubeiri St., Sana'a , Al-Saeed Trade Center
+967 1 203270
+967 1 203271
Islamic Bank of Yemen for Finanance and
+967 1 206117 205680/83/84
+967 1 206116
Bank of Yemen was established in 1971. When the
northern and southern sectors of Yemen reunited on 22
May 1990, the Central Bank of Yemen merged with the Bank
of Yemen under the original name of “Central Bank of
Yemen”. The Central Bank of Yemen is an independent body
created by Law to carry out all the functions of a
normal central bank with the paramount objective of
conducting monetary policy to keep inflation under
control, stabilize the exchange rate of the national
currency and promote investment and economic growth. The
management of the Bank is entrusted to a Board of
Directors with the Governor as Chairman. The
headquarters of the Central Bank of Yemen is in Sanaa.
However it has a branch in each of the twenty
Governorates of the country.
The Central Bank of Yemen uses all the tools of monetary
policy at its disposal in order to keep inflation under
control, stabilize the exchange rate of the national
currency and create an environment that is conducive to
investment and high growth. The main monetary tools the
Bank uses are the following:
The interest rate
The discount rate
Bank reserve requirements
Open market operations
Intervention in the foreign exchange markets
Issue of certificates of deposits
The Central Bank of Yemen is the body which issues the
banknotes and coins of the country. The national
currency of Yemen is the Rial. The exchange rate of the
Yemeni Rial has been floating freely since 1 July 1996
and there has been only one single exchange rate since
then. During 2004 the Rial has only weakened a little
against the US dollar (less than 1%).
Management of the Official Reserves
The Bank is the custodian of the official foreign
reserves of the country, which it invests and manages in
the best interests of the national economy. As a result
of an increase in oil production and the rise of
international oil prices as well as the ongoing economic
and financial reforms, which began in early 2005, the
official reserves has risen from 2.8 months of import
cover in 1994 to 15 months in 2004. The commercial banks
are free to deal in the foreign exchange market and are
allowed to keep balances in foreign currencies for their
account at home and abroad. There are no restrictions on
the transfer of foreign currencies abroad, as the
Republic of Yemen has accepted Article VIII of the
International Monetary Fund in December 1996.
The Central Bank of Yemen maintains accounts for the
commercial banks and acts as a clearing house for their
transactions. The commercial banks keep statutory
reserves with the Central Bank as a ratio of their
deposits. This ratio varies from time to time in
accordance with the condition and state of the economy.
It is one of the monetary tools at the disposal of the
Banker to the Government
Beside maintaining accounts for the various Government
ministries and agencies, the Bank also keeps accounts in
the name of international institutions from which it
makes payment orders to the concerned parties as
instructed. Furthermore, the Bank manages the issue and
redemption of treasury bills.
6. Bank Supervision
The Central Bank of Yemen supervises the banking system
with a view to promoting its soundness and protecting
the interests of depositors and shareholders. There are
seventeen commercial banks in the country, four of which
There is no exchange control in the country, which we
have been dismantling since early 1995. People are free
to bring foreign currencies in any amount into the
country and take them out abroad without any
restrictions. The same applies to transfers of any kind.
As mentioned earlier, the Republic of Yemen has accepted
Art. VIII of the International Monetary Fund in December
The Bank acts as lender of last resort.
The Bank administers and manages the external public
debt of the country.
It acts as advisor to the Government in respect of the
formulation and implementation of economic and financial
The Bank publishes financial and economic data and
reports on a regular basis reflecting the health of the
Economy of Yemen:
Yemen is one of the poorest and least developed
countries in Arabia, with high unemployment, rapid
population growth, and political turmoil. Yemen's
economy depends heavily on the oil it produces, and
its government receives the vast majority of its revenue
from oil taxes. But Yemen's oil reserves are expected to
be depleted by 2017, with fears of a resulting economic
collapse. Yemen does have large proven reserves of
natural gas. Yemen's first liquified natural gas (LNG)
plant began production in October 2009.
Rampant corruption is a prime obstacle to development in
the country, limiting local reinvestments and driving
away regional and international capital. The government
has recently taken many measures to stamp out corruption,
but efforts have been met with only partial success.
Foreign investments remain largely concentrated around
the nation's hydrocarbon industry.
Substantial Yemeni communities exist in many countries
of the world, including Yemen's immediate neighbors on
the Arabian peninsula, Indonesia, Pakistan, the Horn of
Africa, the United Kingdom, Israel, and the United
States, especially in the area around Detroit, Michigan,
and in Lackawanna, New York. Beginning in the mid-1950s,
the Soviet Union and China provided large-scale
assistance. For example, the Chinese are involved with
the expansion of the Sana'a International Airport.
In the south, pre-independence economic activity was
overwhelmingly concentrated in the port city of Aden.
The seaborne transit trade, which the port relied upon,
collapsed with the closure of the Suez Canal and
Britain's withdrawal from Aden in 1967.
Since unification in 1990, the government has worked
to integrate two relatively disparate economic systems.
However, severe shocks, including the return in 1990 of
approximately 850,000 Yemenis from the Persian Gulf
states, a subsequent major reduction of aid flows, and
internal political disputes culminating in the 1994
civil war hampered economic growth. As the fastest-growing
democracy in the Middle East, Yemen is attempting to
climb into the middle human development region through
ongoing political and economic reform.
In the late 20th century Sana'a’s population grew
exponentially, from roughly 55,000 in 1978 to more than
1 million in the early 21st century. Sana'a may be
the first capital city in the world to run out of water.Since
the conclusion of the war, the government entered into
agreement with the International Monetary Fund (IMF) to
implement a structural adjustment program. Phase one of
the IMF program included major financial and monetary
reforms, including floating the currency, reducing the
budget deficit, and cutting subsidies. Phase two will
address structural issues such as civil service reform.
In early 1995, the government of Yemen launched an
economic, financial and administrative reform program (EFARP)
with the support of the World Bank and the IMF, as well
international donors. The First Five-Year Plan (FFYP)
for the years 1996 to 2000 was introduced in 1996. The
World Bank has focused on public sector management,
including civil service reform, budget reform and
privatization. In addition, attracting diversified
private investment, water management and poverty-oriented
social sector improvements has been made a priority for
the implementation of the programs in Yemen. These
programs had a positive impact on Yemen’s economy and
led to the reduction of the budget deficit to less than
3% of gross domestic product (GDP) during the period
1995-99 and the correction of macro-financial imbalances.
In 1997, IMF and the Yemeni government began medium-term
economic reform programs under the Enhanced Structural
Adjustment Facility (ESAF) and Extended Fund Facility (EFF).
This program was aimed at reducing dependence on the oil
sector and establishing a market environment for real
non-oil GDP growth and investment in the non-oil sector.
Increasing the growth rate in the non-oil sector was one
of the government's most important objectives. Programs
also focused on reducing unemployment, strengthening the
social safety net and increasing financial stability. To
achieve these reforms, the government and IMF
implemented containment of government wages,
improvements in revenue collection with the introduction
of reforms in tax administration, and a sharp reduction
in subsidies bills through increased prices on
subsidized goods. As a result, the fiscal cash deficit
was reduced from 16% of GDP to 0.9% from 1994 to 1997.
This was supported by aid from oil-exporting countries
despite the wide-ranging fluctuations in world oil
prices. The real growth rate in the non-oil sector rose
by 5.6% from 1995 to 1997
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