The Central Bank of the self-proclaimed temporary capital city of Aden in southern Yemen issued a decisive announcement last Wednesday, June 26th, to completely and permanently halt the operations of local financial transfer networks owned by banks, financial institutions, or currency exchange companies operating in the Republic.

According to the text of the decision published on the bank's official website and reviewed by "Barran Press," it emphasized that banks, financial institutions, and currency exchange companies must settle pending transactions in their respective transfer networks within a fifteen-day period from the specified date in Article 2 of this decision.

The decision, in its fourth article, warned that the Central Bank will take all necessary legal measures, including revoking licenses, ceasing activities, and imposing appropriate financial penalties, against banks, financial institutions, currency exchange companies, and transfer agents that violate this decision or the implementing instructions issued under it.

This decision comes after a series of previous decisions as part of the bank's efforts to deal with the challenges facing the Yemeni financial system, which has been affected by internationally classified violations by the Houthi group on terrorism lists. The division of the Central Bank into two branches, one in Sana'a under Houthi control and the other in internationally recognized Aden, has created an economic division that has hindered the stability of the Yemeni rial.

The Central Bank's decisions have been widely welcomed by economic observers and experts, who consider them a necessary step to break the grip of the Houthi militia on the financial sector and achieve economic stability in Yemen.

Regarding the goals and importance of the recent decision to ban domestic money transfers and establish a unified network for financial transfers, which was established in February, "Barran Press" spoke to several analysts and experts in the economic field.

The Feasibility of Implementing the Decision
Economic expert Wahid Al-Foudai stated that "compelling banks, financial institutions, and currency exchange companies to cease operations of their local money transfer networks and rely on a unified network for financial transfers (UNMONEY) aims to increase transparency and monitoring of financial transfers."

Al-Foudai, in an interview with "Barran Press," added that the decision will contribute to "combating money laundering and facilitating supervision by the Central Bank. It may help reduce illegal financial activities and improve the efficiency of the financial system by forcing institutions to use a unified network and eliminating currency speculation transactions conducted through the networks, thus contributing to exchange rate stability."

Regarding the potential negative or positive impact of the decision on citizens' transfers, Al-Foudai stated that it "will have a positive impact in terms of increased transparency and speed of transfers, and improvement in confidence in the financial system. However, there may be potential negative effects initially, as citizens may face delays or difficulties in adapting to the new system."

In conclusion, the Central Bank's decision to halt domestic money transfer networks and establish a unified network has been seen as a necessary step to address the challenges facing the Yemeni financial system. While it aims to enhance transparency, combat illegal financial activities, and improve the efficiency of the financial system, there may be initial challenges for citizens in adapting to the new system.

Unified Networks Mechanism: A Promising Step Towards Financial Reform in Yemen

In an exclusive interview with Barran Press, Abdullah Al-Fouda'i shed light on the implementation prospects of the decision regarding the Unified Networks Mechanism (UNMONEY). According to Al-Fouda'i, the success of this mechanism relies on several factors, including the technological infrastructure, which encompasses the availability and development of the necessary technology to efficiently operate the unified network. Additionally, cooperation and compliance from banks and exchange companies with the central bank, along with providing training and technical support to employees and customers to ensure a smooth transition to the new system, are crucial.

Regarding the functioning of the UNMONEY network, Al-Fouda'i explained that it is a centralized platform managed and monitored by the central bank. It aims to unify all local financial transactions under one platform, enabling continuous monitoring by the central bank to ensure compliance and reduce illegal activities. Regular reports regarding financial transfers are also submitted to the central bank.

Al-Fouda'i emphasized that this decision holds significant potential for improving the financial and economic systems in Yemen. However, its successful implementation and achievement of desired objectives require intensive cooperation and coordination. The decision aims to enhance transparency, combat money laundering and terrorist financing, reduce the costs of financial transfers, and improve the overall efficiency of the financial sector.

An Advanced Step

Economic journalist Wafaq Saleh stated that this step comes within the framework of strengthening the central bank's control over domestic financial transfers and enhancing supervision of financial and banking activities nationwide.

Saleh, in an interview with Barran Press, pointed out that there are thousands of financial transfer networks, most of which have been operating outside the control of the central bank. These networks account for the majority of financial transfer activities and are utilized by speculators to manipulate the value of the Yemeni rial.

He further highlighted that the central bank recently launched the Unified Financial Transfers Network as an alternative to these networks, involving the participation of numerous banks and exchange entities. This ensures that the overall financial activity falls under the control and management of the central bank, leaving no room for speculators to manipulate exchange rates.

"This will be an advanced step in regulating the flow of financial transactions between provinces and will contribute to redirecting a significant portion of liquidity to the banking sector, instead of the black market operating outside the central bank's instructions," added Saleh.

The importance of the decision?

In a move that aims to strengthen control over the banking sector, the Central Bank in Aden has decided to reclaim its responsibilities and tasks that were abandoned during the years of war. According to economic specialist Najib Al-Adofi, this decision allows the Central Bank in Aden to oversee the Unified Financial Transfers Network.

Al-Adofi explained that this decision grants the Central Bank knowledge of the cash supply in both foreign and local currencies, as well as market demand for hard currencies and the volume of financial transfers. Additionally, it will help reduce the proliferation of illegal exchange companies and stores that emerged during the war.

The decision will also crack down on fake transfer networks that engage in financial transfers exceeding their capital, leaving transfers pending. Al-Adofi noted that implementing the decision within the specified timeframe will force these fraudulent networks to cease their operations and curb speculation in the exchange market.

Unification of monetary policies

Regarding financial transfers, Al-Adofi stated that the Houthi group has been preventing dealings with the Unified Network established by the Central Bank in Aden. They have complicated the process by imposing the use of two different currencies with varying sizes and values, resulting in increased fees for domestic transfers.

However, Al-Adofi speculated that if the Central Bank in Aden continues to assert its decision, the Houthis may retract their ban on dealing with the Unified Network to ensure the flow of funds to their controlled areas. This is particularly critical due to the liquidity crisis in both local and foreign currencies.

Emphasizing the legal status of the Central Bank in Aden, Al-Adofi stated that others cannot challenge its role and responsibilities. He called for government support, political decision-making, and an end to external interventions to uphold the Central Bank's authority.

Al-Adofi further emphasized that this move will protect the banking sector, address imbalances, reduce currency speculation, and enable the Central Bank to have a clear understanding of the local and foreign cash supply. While the positive effects on the economy, currency value, and the unification of monetary policy may not manifest immediately, he highlighted the need for a specific timeframe considering the ongoing war against these reforms.

The Central Bank in Aden had previously directed all commercial banks and exchange companies to engage with the Unified Financial Transfers Network, which was established in February of the previous year to regulate financial transfer operations.

Yemen is currently grappling with a severe cash crisis, worsened by the deepening disruption of the local currency. The Yemeni rial has reached its lowest level against foreign currencies in Aden and areas under the Yemeni government's control, surpassing 1,800 rials per US dollar. This is a significant decline from the late April rate of 1,676 rials. Similarly, the Saudi riyal has seen an increase in its exchange rate, with 477 rials for sale compared to the previous rate of 441 rials.

The Yemeni economy faces additional challenges due to the monetary division imposed by the internationally classified Houthi group, which has hindered the internationally recognized government from exporting oil. The challenges further intensified after the group targeted oil export ports in October of the previous year.