Economy |

Saudi funds arrive as Yemen riyal hits new low

By Nabil Abdullah al-Tamimi in Aden

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Bank customers wait to withdraw Yemeni currency at the Central Bank of Yemen in Sanaa on August 25th, 2016. [Mohammed Huwais/AFP]

Saudi Arabia announced Wednesday (January 17th) it would transfer $2 billion to Yemen's central bank, following desperate calls for a financial rescue from the Yemeni government, AFP reported.

The bailout aims to curb the fall in value of the Yemeni riyal, which has plummeted during the protracted war between the legitimate government of President Abd Rabbu Mansour Hadi and the Houthis (Ansarallah).

"To address the deteriorating economic situation faced by the Yemeni people as a result of the actions of the Iranian-backed Houthi militias, King Salman bin Abdulaziz has issued a directive to transfer a $2 billion deposit to the central bank of Yemen," the Saudi interior ministry said.

In a letter posted online, Yemeni Prime Minister Ahmed bin Dagher had urged the government's backers to transfer cash to the central bank to "save Yemenis from famine".

Hadi reached out to Saudi Crown Prince Mohammed bin Salman over "the economic challenges Yemen faces" in a telephone call on Tuesday, Yemeni media reported.

Riyal's value at all-time low

Economists warned Al-Mashareq that the decline in the riyal's value to an all-time low against the US dollar would exacerbate the humanitarian crisis the country is facing.

The Yemeni riyal currently trades at 503 to the US dollar, as compared to 215 riyals before the start of the war, they said.

Yemen imports more than 90% of its food needs, and the impact of the ongoing war has left most Yemenis in need of humanitarian assistance.

The drop of the riyal "is a major disaster", Studies and Economic Media Centre president Mustafa Nasr told Al-Mashareq.

"It will be directly reflected on the prices of commodities and services," he said, noting that, according to UN agencies, more than 22 million Yemenis need assistance and another seven million are on the verge of famine.

Nasr described the decline in the value of Yemen's currency as "no less serious than the disaster of war itself".

"The drop in value will be reflected on large segments of the population, and will risk adding millions to those who already face famine," he warned.

Those who will be especially hard-hit by the decline include government employees, who have not received their salaries for a year, and thousands of private sectors employees who have been laid off since the start of war, he said.

Houthis storm Sanaa banks

The prices of basic foods have risen dramatically, prompting many traders to stop sales until prices stabilise.

Owners of some currency exchange offices in Sanaa told Al-Mashareq they blame the Houthis for the price hikes, saying they follow a recent looting spree.

The Houthis last week raided a number of local banks, currency exchange offices and money transfer companies and confiscated large sums of cash of various currencies, Asharq al-Aswsat newspaper reported Thursday (January 11th).

"Money exchange offices have closed their doors since Houthis stormed Al-Kuraimi [Islamic Microfinance Bank] in Sanaa last week," said Yahya Mohammed, who manages an exchange office in Sanaa.

Mohammed told Al-Mashareq he did not want to mention his firm’s name out of fear of retaliation.

"They looted the money of that [bank], and damaged its servers and computers," he said. "The exchange offices that are still open are engaged in money transfers only."

Meanwhile, the Yemeni Foreign Exchange Dealers Association has blamed Houthi gangs for the collapse of the riyal's value against foreign currencies due to their crackdowns on a number of exchange offices, Khabar news agency reported.

"Senior leaders of Houthi gangs are blackmailing and threatening exchangers," an association member said Saturday. "When an exchanger refuses to give in to their orders, they storm his office and loot his money without any legal grounds."

On November 20th, the US Treasury imposed sanctions on a network of individuals and companies accused of printing counterfeit Yemeni currency to help Iran's Islamic Revolutionary Guard Corps (IRGC).

This network employed deceptive measures to circumvent European export control restrictions and procured advanced equipment and materials to print counterfeit Yemeni bank notes potentially worth hundreds of millions of dollars.

This benefitted the IRGC's external operations arm, which has been subject to US sanctions since 2007, the Treasury said.

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