The Yemeni Riyal plummets to the lowest value in its history, without a glimmer of hope for its improvement03/09/2020
Money exchange Companies in southern and eastern Yemen said that the value of the Yemeni Riyal fell again, reaching its lowest value in years. A Money Exchange Company in Aden, the temporary capital of Yemen, told the "Yemen Monitor" that the US dollar reached 800 Yemeni Riyals to sell and 795 Yemeni Riyals to purchase. The Saudi Riyal reached 210 Yemeni Riyals to sell and 209 Yemeni Riyals to purchase.
A Money Exchange Company in the city of Mukalla, the capital of Hadhramaut (southeast), and another in the city of Marib (east), confirmed a comparable value. The Money Exchange Company in Marib confirmed that selling price of the US dollar is 797 Riyals and the buying price 795 riyals. Money Exchange Companies stated that the currency's value might change at any moment.
Wafeeq Saleh, a journalist and economic researcher, said: The Riyal had never witnessed this decline and reached this number, except in August 2018, due to the UAE's speculation to dismiss the government of Ahmed Obaid Bin Dagher. At that time, the US dollar was restrained, after Saudi intervention by depositing two billion dollars in the Central Bank of Aden as a financial deposit to restore stability to the exchange markets, and to ensure that the bank continued to carry out its duties in financing the import of basic commodities.
Saleh pointed out that: Practically, the value of the Yemeni riyal was expected to decline to this level, with the depletion of the Saudi deposit from the central bank in Aden, and the scarcity of foreign currency in the banking market.
Saleh said there are several factors that caused the plummeting of the Yemeni Riyal: The scarcity of foreign currency sources, the disruption of many key resources and other factors related to the poor performance of the government and the Central Bank and their failure to take any measures to impose a unified monetary policy across the country.
The Houthis had stopped dealing with new editions of the Yemeni Riyal in several areas of which they control since last December, which created two values for the Yemeni Riyal, the first in the Houthi areas and the other in the governorates under the legitimate government.
A Money Exchange Company in Sanaa told the "Yemen Monitor" that the value of one US dollar on is 604 Yemeni Riyals to sell and 602 to purchase. The value may vary in other areas under Houthi control, by a difference of one to two Yemeni Riyals.
The Money Exchange Companies spoke on condition of anonymity. Remittances have been affected by the decline in the currency value, as customers in legitimate government areas pay more than 35% of the amount to be transferred to Houthi areas as fees.
Saleh pointed to other factors that led to this discrepancy in the value of the Yemeni Riyal, saying: The process of banning the new currency editions undermined the influence of the Central Bank in Aden. It confused its accounts in managing the banking sector, but it did not take any other steps to get out of the impasse in which the government was crammed and its inability to implement its financial policy and introduce new currency denominations in all regions.
Saleh said: Currently, with the absence of any indications of security and political stability in the country, it remains premature to talk about the need to take strategic and long-term plans for economic recovery, restoring stability to exchange markets, and protecting the riyal from collapse.
The economic researcher added, however, the shortest way remains is temporary solutions by providing the central bank with financial grants and deposits in hard currency to calm the banking market, while tightening government control over the beneficiaries of the central bank’s interventions and adhering to the principle of transparency and integrity, even if it also lacks any indications of Reality.
The Under-Secretary-General for Humanitarian Affairs, Mark Lowcock, during his briefing to the Security Council in the past few weeks, referred to the deterioration of the Yemeni Riyal, warning that Yemen was “falling from the abyss”. “We have never seen a situation in Yemen where such a severe domestic economic crisis overlaps with a sharp drop in remittances and substantial cuts in donor support for humanitarian aid - and that of course all happens in the middle of a devastating period,” Lowcock said. Pointing out that the value of the Yemeni Riyal has declined and that food prices rose between 10% and 20% in some areas within two weeks last June.
The Saudi deposit:
In a report by the Geneva-based project "ACAPS" that provides humanitarian and economic analysis, Saudi financial support for the Yemeni economy, which amounted to more than $ 2.2 billion since March 2018, has been crucial in helping Yemen escape from the economic collapse.
He added: With the end of this financial support, and the absence of alternative financing, Yemen could lose almost half of its currency value over the next six months (up to 1,000 riyals to the US dollar). The Yemeni government has withdrawn most of this deposit during the past two years.
The division that occurred in Yemen as a result of the war was reflected in the economic situation, as in September 2016 the legitimate government transferred the Central Bank to Aden, where the temporary capital is. The Houthis issued a decision in December 2019 banning the circulation of any new banknotes printed by the legitimate government, and they only deal with previously printed banknotes.
According to unofficial estimates, Yemen lost more than five billion dollars directly, which could have been pumped into the state treasury during the past five years due to the suspension of oil and gas exports. About 10 international companies investing in the oil and gas sector left Yemen in early 2015, and dozens of local companies operating in this sector and other economic sectors have stopped. The Yemeni government is trying to revive this sector, but the deterioration of oil prices makes its impact on the Yemeni economy and the currency more difficult.
Yemen has entered a state of war since 2014, when the Houthis took control of Sana'a and most of the country's governorates, forcing President Abd Rabbu Mansour Hadi and his internationally recognized government to flee the capital, Sanaa. In March 2015, the Saudi-led coalition was formed to support the legitimate government, and since that time, it has carried out air strikes against the Houthis on more than one front. The coalition launches air strikes continuously on the Houthi-controlled areas, and the Houthis in return launch missiles at the Kingdom of Saudi Arabia.
Tens of thousands have died as a result of the war, and Western estimates indicate that more than 100,000 Yemenis have fallen over the five years. The fighting in the country has also caused the worst humanitarian crisis in the world, according to the United Nations, as about 24 million people need humanitarian assistance or protection, including 10 million people who depend on food aid to survive.