The Yemeni riyal has fallen due to the weakness of “legitimacy” and the militias’ measures
Wednesday – 4 Dhul-Hijjah 1442 AH – 14 July 2021 AD Issue No. [
An employee at the Houthi-controlled central bank in Sanaa (EPA)
Aden: Ali Rabie
In the first measure seeking to contain the repercussions of this collapse, the Central Bank of Yemen in Aden announced the implementation of a wide campaign targeting what it described as “exchange rate manipulators.” The bank said in a statement that the campaign it launched is carried out in cooperation with the Public Funds Prosecution and the security services, and aims to “control abuses and violations by speculating in exchange rates, and those who cause the deterioration of the value of the local currency against foreign currencies, as well as arresting violators of the Central Bank’s instructions.”
It is not known whether these measures will immediately curb the riyal’s slump, as economists believe that the issue of saving the value of the currency needs comprehensive economic treatments, accompanied by political and security stability.
While this decline in the price of the Yemeni currency ignited the prices of basic commodities, residents in the city of Aden, where the temporary capital of the “Middle East”, asserted that they can no longer provide for their necessary needs from their meager salaries, and that they feel that they are on the verge of starvation in light of the unprecedented rise. In commodity prices and low purchasing power.
Workers in exchange companies in Aden and Marib said that the dollar reached more than a thousand riyals for sale, at the lowest drop in the local currency ever, at a time when fees for internal transfers from areas under the control of the legitimate government to areas under the control of the putschists increased to more than 60 percent.
Economists and activists blamed the weak performance of the legitimate government and the central bank in Aden for not taking measures that would balance the supply of hard currencies and the demand for them, while others saw that the real reason was due to the conflict between the components of legitimacy in the southern governorates, as it was unable to The Prime Minister and a number of his ministers were prevented from returning to Aden due to security concerns and the failure to implement the security and military part of the “Riyadh Agreement.”
In addition to the weak economic performance, which was exacerbated by the political differences between the anti-Houthi militias, the latter also contributed to the destruction of the Yemeni economy by preventing the circulation of the new edition of the printed currency through the Central Bank in Aden, in addition to imposing transfer fees on internal transfers and instructing it to buy hard currencies from Legitimacy control areas and their accumulation for the benefit of the group.
Although legitimacy moved the central bank to Aden years ago, most of the banks remained headquartered in Sanaa under the grip of the putschists, which enabled the group to impose a parallel banking system that it controls by force.
Observers of the Yemeni affairs rule out that the legitimate government will be able to control the economic situation again without developing oil exports, improving the state’s public treasury resources and obtaining international support, in parallel with ending the state of political discord among its components in the liberated areas, especially in the southern governorates.
In the past years, the Yemeni riyal has maintained a relative consistency in light of the presence of the Saudi billion deposit with the Central Bank in Aden, but the depletion of the exchange from it in favor of imports of major commodities, with a scarcity of resources and the absence of a strict monetary policy, contributed to the recent deterioration.
Observers believe that the wide spread of exchange shops contributed in one way or another to the deterioration of the currency price, as major money changers speculate in hard currency without real demand.
At the end of last month, the Central Bank of Yemen in Aden issued directives to exchange companies and shops to close all local financial transfer networks between the southern governorates, in a new measure to put an end to the continuous deterioration of the local currency.
The Exchangers Association in Aden said at the time, in a statement, that, at the direction of the Central Bank, it was decided to close all remittance networks without exception, but this procedure did not last long, as the companies returned to work days later.
The Yemeni riyal has lost more than three quarters of its value against the dollar since the beginning of 2015, as the dollar exchange rate was 215 riyals in 2014, and the currency’s deterioration caused a significant increase in prices amid the inability of many Yemenis to buy some basic commodities.
The pro-Iranian coup group in its areas of control refuses to allow the circulation of new editions of the Yemeni currency issued by the Central Bank in Aden, despite the scarcity of liquidity. And it has previously confiscated billions of them to direct them through loyalists to buy hard currency or goods from the areas subject to legitimacy.
As a result of this Houthi policy, Yemenis pay about half of the sums they transfer to their families in Houthi militia-controlled areas, without the legitimate government’s measures so far succeeding in regaining control of the banking sector.