Amid currency’s freefall, Yemen receives cash injection
SANAA, Yemen (AP) — Yemen’s weak Central Bank is getting a $200 million cash infusion from Saudi Arabia to shore up its reserves after the currency went into freefall, sparking further concerns for the world’s worst humanitarian crisis.
The state-run Saudi Press Agency said the “donation” will help “achieve stability of the Yemeni economy and boost the local currency” in the war-torn country.
The Yemeni rial traded between 700 to 800 rials to the dollar on Monday and Tuesday, sending food and fuel prices soaring. Before the civil war erupted in 2015, the rial was around 215 to $1.
Yemen’s conflict pits a Saudi-led coalition backing the country’s internationally recognized government against the Shiite rebels, known as Houthis. The government controls the south, where its Central Bank is located, while the Houthis control northern Yemen.
The fighting has killed over 10,000 people and pushed Yemen’s population of 29 million to the brink of famine.
With 8.4 million not knowing where their next meal is coming from, the U.N. Office for the Coordination of Humanitarian Affairs warned last month that a further slide by the rial could make an additional 3.5 million Yemenis insecure about food, and that over 2 million are “likely to be at a heightened risk of famine.”
Even in cities and town where food can be found in marketplaces, many do not have the cash to pay for it.
In the Yemeni capital, Sanaa, grocery stores and supermarkets were closed on Tuesday morning and long lines of cars were seen outside gas stations. Many exchange offices shut down.
As the dollar value varied from one place to another, Yemenis took to social media to post rates from their locations and decry the government’s lack of action.
Protesters have also taken to the streets over the past days in the south, blocking roads and burning tires, demanding President Abed Rabbo Mansour Hadi sack his government over its failure to improve the economy.
After the war broke out and the Saudi-led coalition imposed a sea, air, and land embargo, Yemen’s oil and gas production and exports — which amounted to nearly 70 percent of the country’s revenue — were basically obliterated. The embargo also contributed to increasing prices of imports. Ninety percent of Yemen’s food and fuel are imported.
In 2016, Hadi’s government moved the Central Bank from the Houthi-controlled Sanaa to Aden after accusing the rebels of using the bank’s funds to finance the war and buy weapons.
The move backfired as it split the only functioning institution in Yemen and dealt a blow to bank operations. More than one million state employees were left without a steady income.
Then last year, Hadi’s government floated the local currency to close the gap between the official rate and the black market, and printed millions of rails without coverage. Using an earlier Saudi deposit of $2 billion dollars, the Central Bank funded imports of food staples, including wheat.
However, many Yemenis in the south blame the coalition for failing to better prop the government and help rebuild southern cities destroyed in the fighting. Others blame the Houthis for not handing over tax and port revenues they collect to the Central Bank.
Yemen’s worsening economy comes as the coalition battles to dislodge the Houthis from the vital port city of Hodeida, the main entry point for imports and aid to the country.