The Central Bank of Yemen was established in 1971. After the blessed union of the two parts of the country on May 22, 1990, the Central Bank of Yemen and the Bank of Yemen were merged into one bank called the Central Bank of Yemen which is based in the capital of Yemen, Sana'a. The Central Bank is fully independent to implement its functions in monetary policy. The Central Bank is managed by a Board of Directors and chaired by the Governor of the Central Bank of Yemen. The head office of the bank is in Sana'a and it has branches in all governorates of the Republic.

 

Main tasks

 

1. Monetary Policy: The Central Bank uses all monetary policy tools to control inflation, stabilizes exchange rates of the national currency and create the right climate for investment and growth.

 

These tools are as follows:

• Interest rates

• Discount Percentage

• Legal Reserve of Banks

• Control of liquidity in the economy

2. Issued currency: The Central Bank is the only authorized entity to issue banknotes and coins to Yemen. The national currency is the Yemeni riyal.

 

3. Reserve Assets Management: The Central Bank manages and invests Yemen's reserve assets to meet the requirements of the national economy. Commercial banks have all powers to deal in foreign exchange and are allowed to hold foreign exchange balances in Yemen and abroad. There have been no restrictions on foreign exchange transfers since the adoption of Article IV of the IMF Agreement.

 

4. Bank of Banks: The Central Bank keeps accounts for commercial banks and provides the services of the Clearing Chamber for the operations of commercial banks. Commercial banks hold the legal reserve as a percentage of deposits with the Central Bank. This ratio changes according to economic developments and is considered one of the monetary instruments available to the Central Bank.

 

5. Government Bank: The Central Bank manages the accounts of ministries, bodies, and government departments in addition to the accounts of international and regional institutions. The Bank also manages the issuance and maturities of treasury bills on behalf of the government.

 

6. Supervision of banks: The Central Bank supervises the banking system in Yemen with the aim of enhancing its reputation and minimizing the risks to which banks might be exposed to, in order to preserve the interests of depositors and shareholders.

7. Other functions of the Bank:

 

a. The bank acts as the lender of last resort.

b. Management of Yemen's external public debt.

c. The bank acts as an advisor to the government in the field of formulation and implementation of fiscal and economic policies.

d. The Central Bank issues regularly financial and economic data that reflect the health of the local economy.