For the past 18 months, Yemen has been going through one of the most chaotic times of its modern history. Since the Houthi takeover of the capital, Sanaa, on Sept. 21, 2014, the country has been witnessing a gradual collapse of the state, which was accelerated when President Abed Rabbo Mansour Hadi left Sanaa for Aden and then for Riyadh. By March 2015, the Houthi rebel group was the de facto power running the country.
As the war continues, most of the country’s public institutions are barely functioning. The health sector cannot provide for the wounded and the sick with three doctors per 10,000 people, while 14 million people need help accessing health care. Education in schools and universities has been interrupted by the many rounds of fighting, and around 1.8 million Yemeni children are out of school because of the ongoing war.
One of the last standing public institutions in Yemen is its central bank. The Central Bank of Yemen (CBY) has been playing a major role in stabilizing the very fragile economic situation in Yemen since the outbreak of the uprising in 2011. It has maintained a very careful monetary policy in order to preserve the value of the Yemeni rial to spare the people of Yemen the agony of hyperinflation and devaluation during politically volatile times.
Since the Yemeni economy is a small economy, it took only a $1 billion deposit from Saudi Arabia in the CBY back in 2012 to provide some stability to the Yemeni financial system and enhance the trust in the CBY. In addition to that, Riyadh has been providing aid in the form of fuel and oil to the country since 2011 in a manifestation of its role in sponsoring the talks that led to the signing of the Gulf Cooperation Council Initiative and its support for the transitional government led by Hadi.
The trust in the CBY took a blow in March 2015 when the government along with the president had to flee the country, leaving financial matters to be run by the governor of the CBY.
The technocratic and bipartisan leadership governing the CBY is what enabled its survival. The CBY governor, Mohammed Awad Bin Hammam, is a widely respected official in a country where bipartisanship seems almost impossible. His administration banned cashing foreign transfers in their original currency for a few months in 2015 to stop the dollar drain after trade significantly slowed down when the Saudi-led coalition's airstrikes started....MORE