On Saturday, Yemen’s currency reached a new record low against the US dollar. This came a day after the head of Yemen’s Presidential Leadership Council appealed to Arab leaders in Jeddah, seeking their support for his government’s reforms aimed at stabilizing the struggling economy.
Money traders in government-controlled areas said that the Yemeni riyal fell to 1,320 to the dollar for the first time since the beginning of this year, after more than a year of stability.
The riyal hovered around 1,200 against the dollar since the formation of the presidential council in April last year and the return of government duties to Aden, the country’s interim capital.
The riyal, however, began to decline last week as international efforts to achieve peace in Yemen reached a deadlock, reaching 1,300 per dollar before dropping further to 1,320 per dollar. In early 2015, the Yemeni riyal sold at 250 against the dollar.
The Yemeni government’s efforts to stem the devaluation of the riyal, which included shutting down unlicensed exchange firms, providing oil and goods importers with dollars, suspending the internal transfer system between exchange shops known as hawala, and restricting the smuggling of foreign currencies out of the country, have largely failed.
The riyal reached a record low of 1,400 to the dollar in October 2019 despite the central bank closing 60 non-compliant exchange shops and businesses.
The Yemeni central bank cautioned Yemenis last week against retaining their money in local exchange firms’ accounts, stating that these firms’ activities are buying and selling currency, not opening accounts.
“The central bank confirms to the public that the activity of exchange companies and facilities is limited by law to buying and selling foreign currency and money transfers, and punitive measures will be taken against infringing organizations,” the central bank said.
Yemenis say that they are encouraged to keep their money with exchange banks because they have adequate cash, offer better services such as utility payments, and are open most of the day. In contrast, private and state banks in Yemen are suffering from acute liquidity shortages and offer less appealing services.
A $1 billion cash injection into the central bank by Saudi Arabia earlier this year supported the Yemeni riyal for months, allowing the Yemeni government to pay for food and fuel imports while also covering a significant drop in revenue to the public treasury as a result of Houthi drone and missile attacks on oil facilities in the southern provinces of Shabwa and Hadramout.
The depreciation of the Yemeni riyal occurred as the head of the presidential council, Rashad Al-Alimi, urged Arab leaders meeting in Jeddah on Friday to support the internationally recognized council in ending the Iran-backed Houthis’ coup, implementing economic reform, and ending Iran’s intervention in the country’s affairs.
He expressed hope that current Saudi and Omani efforts would lead to the renewal of the UN-brokered truce and reaching peace.
“We hope for a collective Arab movement, working alongside our brothers in the coalition, to put an end to the egregious (Houthi) violations of international law, to support the Yemeni government’s efforts to revive the economy and improve basic services, to support life-saving humanitarian interventions, and to support the initiatives of brothers and friends to restart the political process,” Al-Alimi told the summit.
Similarly, a Yemeni government official told Arab News on Saturday that the Yemeni government was seeking financial assistance for the central bank, the public budget, and the purchase of fuel for public power plants.
“We want support for the central bank, the state’s general budget in view of the halt in oil exports, and an improvement in services, particularly the energy sector, which drains more than $3 million per day from government coffers,” the official, who requested anonymity, said.