AL-MUKALLA: The Yemeni riyal has fallen to a historic low of 2,000 against the US dollar in government-controlled areas, raising concerns that it will exacerbate the dire humanitarian situation and fuel further violence in the war-torn country.
Money traders and local media on Thursday said that the riyal was trading at 2,040 against the dollar in the port city of Aden, Yemen’s interim capital, and other Yemeni cities controlled by the Yemeni government, a dramatic devaluation against the dollar.
A decade ago, when the Houthis seized power, 215 riyals were needed to buy a dollar.
The riyal fell to an all-time low of 1,700 against the dollar in June, after hovering at about 1,200 for months after the formation of the Presidential Leadership Council in early 2022.
In an effort to limit the riyal’s depreciation, PLC chairman Rashad Al-Alimi has ordered the implementation of the government’s Economic Rescue Plan, which focuses on combating corruption and all forms of smuggling, including the smuggling of hard currencies out of the country, containing the money supply in the market, optimizing import expenditures, reinforcing and supporting central bank measures, and boosting the agricultural sector.
Al-Alimi held talks with senior military and security officials and asked them to assist in implementing the central bank’s measures to limit the depreciation of the riyal.
During a meeting with the central bank leadership last week, Prime Minister Ahmed Awadh bin Mubarak said that the rapid devaluation of the riyal was unjustified and blamed it on “a deliberate plan” to undermine the economy of Yemen’s government-controlled areas.
At the same time, the official news agency SABA reported that the governor of the central bank in Aden, Ahmed bin Ahmed Ghaleb, and the minister of finance, Salem bin Buraik, are now in the US where they lobby for international assistance to the Yemeni economy to shore up the riyal during their meetings with officials from the International Monetary Fund, the Arab Monetary Fund, and other international funds.
To boost the bank’s shrinking liquidity and keep the currency stable, the central bank announced in the past three days that it would sell $80 million from its foreign currency reserves in public auctions, as well as another auction for short-term and long-term government debt instruments, beginning with 15 billion riyals and offering expected returns of 18 percent to 20 percent.
During previous rounds of riyal devaluation, the central bank in Aden closed exchange companies and shops suspected of engaging in currency speculation, canceled the informal transfer system between local exchange firms and replaced it with a new system under its control, and supplied the dollar to local fuel and goods importers.
Al-Alimi and his government officials have repeatedly blamed the country’s economic downturn on the Houthis’ economic measures against the government, such as prohibiting local traders from importing goods through government-controlled ports and the militia’s attacks on oil terminals in the southern provinces of Hadramout and Shabwa, which halted oil exports, the government’s primary source of revenue.
According to the monthly bulletin on food security in Yemen, released by the World Food Programme in late September, the Yemeni riyal has devalued by 24 percent year on year and lost 68 percent of its value in government-controlled areas over the past five years, attributing the decline to shrinking foreign reserves, suspended oil experts from government areas, and dwindling remittance inflows. The WFP predicted that the riyal would reach 2,100 against the dollar by January next year.
The devaluation of the riyal has pushed up prices of basic commodities, fuel and transport in recent months, sparking protests in some areas such as Taiz, as well as angry reactions from Yemenis in the streets and on social media.
People say that the riyal’s rapid depreciation has made their lives difficult and pushed them into famine. Mohammed Al-Youbi, a father of seven from the small village of Al-Ma’afari in Merkhah Al-Ulya district in Shabwa province, told Arab News that most of his children are unable to attend school because he cannot afford to transport them and that his family “cannot afford to buy meat or chicken and other basic stuff.”
Al-Youbi added: “People are heading for the abyss; we complained and posted about it on social media, but no one cared. The government is riddled with corruption, and ministers don’t care because their salaries are in dollars.”
