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Yemeni Rial Continues to Plunge amid Public Discontent

Yemeni Rial Continues to Plunge amid Public Discontent

Wednesday, 15 August, 2018 - 11:15
A Yemeni man exchanges money in Sanaa. (AFP)
Sanaa, Aden – Asharq Al-Awsat

Iran-backed Houthi militias in Sanaa and other Yemeni areas under their control have refused to take any action in support of the legitimate government's efforts to end the devaluation of the local currency. In addition, the militias imposed new restrictions on currency trading that would further deepen the economic crisis.

The militias banned the transfer of the rial from areas of its control to areas of the legitimacy’s control, banking and traders sources told Asharq Al-Awsat. They also revealed that the militias removed the new banknotes issued by the Central Bank of Yemen in the interim capital Aden from circulation, outlawing its use.

Asharq Al-Awsat has seen a leaked document in Sanaa that includes new Houthi orders issued from its national security agency to all checkpoints on the roads leading to Aden, Marib and the rest of the areas controlled by the legitimate government.

The directives bar the transfer of any cash towards the areas of the legitimacy and instruct officials to confiscate and arrest violators.

Observers believe that, through these measures, Houthis are likely trying to deepen the crisis in the currency as it continues to decline.

The government tried to curb the currency’s collapse by cracking down on unlicensed exchange shops in Aden, Marib and Taiz. However, militias in Sanaa refused to take action against currency traders and unlicensed shops in an effort to exacerbate the economic situation.

The government and the Central Bank tried to counter the situation by carrying out a number of measures, including subsidizing imports of commodities and providing traders with foreign currency at a rate lower than the black market, depending on the Saudi deposit, but to no effect.

The Central Bank in Aden recently announced that it will directly intervene to save the local currency and restore stability through the injection of hard currency to the market. However, it was not effective as the dollar reached about 570 rials on Tuesday, its highest rate yet.

Several angry protests erupted in Aden and some areas under the legitimacy control against high prices and the exchange rate, while government salaries remain unchanged, witnesses told Asharq Al-Awsat.

Meanwhile, Yemeni Prime Minister Ahmed Obeid Bin Daghr proposed several steps that would put an end to the continued devaluation of the rial.

Speaking at a Yemeni-Gulf conference in Riyadh on Monday, he announced government plans to take two urgent measures to save the currency from further collapse and prevent a social, political and humanitarian crisis. He explained to the conference that the procedures will include managing liberated areas to ensure all transactions are done with the Central Bank rather than currency traders.

He also proposed to arrange expatriate funds to be transferred through the Central Bank and the National Bank as was the practice years ago.

Bin Daghr believed that the proposed steps, along with Saudi deposit at the Central Bank, would be sufficient to stop the deterioration of the rial, especially since these measures will not cause any new financial burdens on any party.

The prime minister admitted that his government was aware of the growing tensions among citizens, especially those working in the education, health, public works, agriculture, fishing and other government sectors. He called on all parties involved in the management of liberated areas to cooperate and prioritize people’s needs.

The Houthis’ plundering of resources, currency manipulation and weapons smuggling are the main reason for the deteriorating economy and failure of the efforts of the legitimate government, said observers.

On Monday, head of the Houthis’ Supreme Political Council, Mahdi al-Mashat, ordered officials to pay half the salaries of public servants in areas under Houthi control in an attempt to contain public anger. However, the group excluded all employees who were not subject to it and refused to work under its authority.

The rapid depreciation of the rial during the past two weeks led to an unprecedented rise, reaching 30 and 40 percent, in the prices of commodities, including rice, wheat, milk and fuel.

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