Houthis’ manipulation of currency prices threatens stability in Yemen

The Iran-backed Houthi militia (Ansarallah) is manipulating currency prices in areas under its control, compounding the humanitarian suffering of Yemenis, according to economists.

Yemen's Higher Economic Committee has accused the Houthis of pushing the economy to the brink of collapse by allowing currency speculation, which has negative effects on relief efforts, economic development and reconstruction efforts.

The Houthis are using the currency manipulation scheme -- buying and holding currency in the hopes of selling it at a profit in the future -- to serve Iran's political interests in the region, economists say.

Exploiting Yemen's fragile economy

The Houthi militia insists on exploiting the economic and financial situation in Yemen and the needs of the people in areas under its control, the Higher Economic Committee said in a statement published May 28th.

Currency speculation is causing a collapse in the value of the local currency, which has seen relative stability recently thanks to the measures taken by the Higher Economic Committee and Central Bank of Yemen in Aden, it said.

The Yemeni riyal fell against the US dollar in September and October of 2018 to 800 riyals per $1. But interventions made by the Central Bank succeeded in raising the value of the currency to 500 riyals per dollar for the past three months.

The Committee accused the Houthi militia of exploiting the collapse in the value of the riyal and the suffering of the people for the benefit of political parties. The Houthis then blame the government and the Arab Coalition for the resulting deterioration in the humanitarian situation, it said.

The Central Bank of Yemen is continuing to carry out its duty of providing foreign currency to meet the needs of all traders to import food, goods and fuel, the Economic Committee said.

Currency speculation sabotaging economy

"The Central Bank provides importers with hard currency to import all their products, and has set the exchange rate for the import of basic commodities, such as wheat and flour, at 440 riyals per dollar," said Mustafa Nasr, chairman of the Studies and Economic Media Centre.

The exchange rate for the import of other items, including oil derivatives, is set at 506 riyals per dollar for traders importing them to Houthi-controlled areas, he told Al-Mashareq.

"These measures provide hard currency for traders to open import credits for their products, including oil derivatives for traders and importers in Houthi-controlled areas," he said.

"Currency speculation by traders in Houthi-controlled areas will destroy all the measures implemented by the Central Bank in Aden, which have brought relative stability for the riyal in the exchange market, even though the Central Bank offers the dollar to importers at lower than market price, which ranges from 530-550 riyals," Nasr said.

"Last year, commodity prices rose to outrageous levels, by 70 to 80%, because of the drop in the price of the riyal against hard currencies, especially the US dollar," said economist Abdul Jalil Hassan.

Yemen is a net importer of food and thus any fluctuation in foreign currency prices has a direct impact on commodity prices, he told Al-Mashareq.

The rise in the price of the dollar also has a negative impact on derivative prices, which consequently leads to an increase in the prices of food and all other products because of the resulting increase in transportation costs, he said.

Hassan called on the Houthis and traders in their areas to "abide by the rules set by the Central Bank and spare the economy from the meddling that is [adversely] affecting food prices and exacerbating the suffering of citizens".

Manipulating the economy for foreign players

Hassan questioned who benefits from the rise in prices and manipulation of people’s livelihoods through speculation in hard currencies when the Central Bank is making them available at lower prices.

He said the foreign entity for whom the militias work, referring to Iran, "gains propaganda benefits against its rival states in the region while the suffering of the Yemenis increases to intolerable levels".

Economist Abdul Aziz Thabet also said the Iranian regime gains from the militia group's meddling in the Yemeni economy.

"The Houthis’ manipulation of the economy is one of their objectives aimed at serving Iran’s project in the region while shifting the blame for the humanitarian suffering in Yemen to the Arab Coalition," he told Al-Mashareq.

Thabet said the thing causing the budget deficit is the fact that Yemen cannot raise hard currencies from its exports to pay for its imports, "which means the country has to borrow to pay for its imports".

"This is what the Central Bank did by using the Saudi deposit, which brought relative stability to the value of the national currency," he said.