The fighting in Yemen may have reached a bloody stalemate, but far from the north-south frontline, a battle between rival central banks shattered the currency and helped spike prices.

Soaring inflation has compounded misery in a country where most of the 29 million people depend on aid to stay alive.

Yemen’s economy was fragile even before war broke out in 2014, but the International Monetary Fund now describes it as facing “an acute economic and humanitarian crisis.”

Yemen is divided between an internationally recognized government in the south, backed by a Saudi-led military coalition, and the Iran-aligned Houthi movement which controls most of the north and Hodeidah’s main sea port. Red.

Each side also has a central bank with opposing policies.

The central bank of Aden, which has access to international financial markets, has increasingly turned to printing new foreign currency notes to cover the government deficit and pay public sector salaries, especially those of the military. security and military.

This inevitably drew criticism in the north, where only the old, increasingly tattered riyal notes are accepted.

“Aden’s central bank has signed contracts with private companies to print 5.32 trillion yen over the past six years,” said Hashim Ismail, governor of the central bank of the northern capital of Sana’a. “It’s fair to say that this is three times what the central bank of Sana’a has printed in 60 years.”

The result is that even Yemen’s exchange rate is divided. The rate for new banknotes in Aden hit 1,000 YER to the dollar this week. In Sana’a, held by the Houthis, the rate was around 600 YER.

Aden’s central bank, which did not respond to multiple requests for comment, has sought to support the currency’s weakening by doubling interest rates last year and warning exchange houses against exceeding the official exchange rate of 580 YER.

Aden’s government said on Tuesday it was “fully confident” that Saudi Arabia would intervene before the economy collapsed.

President Abd-Rabu Mansour Hadi, whose government was ousted from Sanaa by the Houthis in late 2014, moved the central bank to Aden in 2016. He accused the Houthis of squandering $ 4 billion in bank reserves for the war. The Houthis say the funds were used to finance imports of food and medicine.

Rafat Al-Akhali, a researcher at the Blavatnik School of Government in Oxford, said the northern exchange rate was being kept artificially strong. “The exchange rate is maintained by suppressing demand and completely controlling supply,” he said.

He said the southern government “continues to use questionable processes for the payment of public wages without a clear payroll for military and security forces.”

The IMF and the United Nations have tried unsuccessfully since 2018 to bring central banks together as part of broader blocked efforts to end the war.

Hadi’s government accuses the Houthis of diverting revenue from the port of Hodeidah, the main entrance to Yemen’s trade and aid flows. The Houthis want the coalition to lift the blockade before agreeing to resume peace talks.

As the Muslim holiday of Eid al-Adha approaches in July, supermarkets in Aden have attempted to lure customers with offers on imported items. But a lot of people can’t even afford the basics.

“Our situation in Aden has deteriorated so much,” said Oum Ahmed Nabeel, a government employee in the southern port city.

Meanwhile, Yemenis who have to send money on the front line face costs that can amount to almost 60% of the transaction value due to different exchange rates and associated transfer fees. “It is unfair,” said Mohammed Ahmed al-Hadhari, director of a Sana’a currency exchange agency.

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