Twelve commercial banks and one public sector specialized bank (Cooperative Agricultural Credit) operate in Yemen under the oversight of the Central Bank of Yemen (CBY). Since 1996, three Islamic banks opened and are competing successfully in the banking sector. In August 2006, the CBY licensed Qatar National Bank (QNB), which has branches in London and Paris. QNB is expected to open in 2008.
CBY has maintained a 13 percent interest rate on rial deposits and now allows each commercial bank to determine interest on its foreign currency accounts. The change reflects expectations for a high but stable inflation rate and for a stable rial-to-USD currency exchange in 2006.
In addition to its oversight of 14 banks, the CBY issues licenses for banking activities to supervise the banking sector. Of the 17 licensed banks, 10 are national banks, three are local branches of foreign banks, and four are joint venture banks.
The Yemeni rial has floated freely since 1996, and the exchange rate was stable in the 174-175YR/1USD range until October 2002. After falling to 182-183 YR/1USD by the end of 2002, the rial has remained relatively stable. At the end of 2007, the rial sold at a market rate of 199 YR/1USD. In order to evaluate imports for tariff collection, the Customs Authority bases its calculation on a monthly average exchange rate published by the Central Bank of Yemen set to the prevailing market rate.
The ROYG committed itself to implementing the projects and programs stated in the World Bank’s Poverty Reduction Strategy Paper managed by the Ministry of Planning and International Cooperation (MOPIC). These projects cover areas of economic growth, human resources development, infrastructure, and social protection. Some of the projects were implemented during the 2003-2005 period and 70 percent of these projects were self-financed through the ROYG budget. The government seeks assistance from the international community to finance the remaining 30 percent.