The Central Bank of Yemen in Aden has announced a new auction for short-term treasury bills, offering a high annual yield of 20% to attract liquidity amidst ongoing economic deterioration and currency devaluation.
The auction, scheduled for Wednesday, July 8th, will offer treasury bills with a maturity of one year, with an initial value of two billion Yemeni riyals, potentially expandable. The competitive bidding process allows participants to submit multiple bids, provided the annual yield does not exceed 20%. The minimum subscription amount has been set at 50 million riyals.
Interest payments on these treasury bills will be disbursed every six months, calculated based on the actual number of days from the settlement date, which will be completed within two business days of the auction. The bank emphasized that bids cannot be amended or canceled once accepted and allocated.
The Central Bank will accept cash deposit notifications from its branches in liberated provinces to cover subscription values and urged all participating branches and local banks to adhere strictly to the auction terms, warning of legal and financial repercussions for any violations.
Economic observers interpret the issuance of high-yield debt instruments as a reflection of escalating financial pressures on the government and its need to draw liquidity from the banking sector and investors, particularly during a period of revenue scarcity and increasing obligations for public finances.
Economists caution that increased yields on debt instruments could raise the cost of government borrowing and divert banks from financing productive activities and the private sector, potentially exacerbating economic stagnation, even if it temporarily absorbs some circulating liquidity. The Central Bank maintains that the auction is part of its monetary policy tools for liquidity management and financial stability. However, critics argue that such measures will not yield sustainable results without broader fiscal and economic reforms, including revenue enhancement, expenditure rationalization, support for production and exports, and addressing imbalances affecting the exchange rate and inflation levels.
