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Currency crisis deepens the suffering of Yemenis

UNITED STATES (OBSERVATORY NEWS) — Preventing the Houthi rebels in Yemen from circulating new banknotes issued by the internationally recognized government threatens to double the acute economic crisis and further suffering in the country mired in war five years ago.

File AFP

Yemen, the poorest country in the Arabian Peninsula, has been witnessing a devastating war between the government and the rebels since 2014, which led to a major humanitarian crisis.

The ban came into effect on January 19, and the residents of Sanaa and the owners of money exchange shops have stopped dealing with the new banknotes for fear of penalties that could reach up to ten years in prison, according to sources close to the rebels.

The rebels insist that the decision to block these new currencies – which the government began printing in early 2017 – aims to protect people from inflation.

The exchange rate in Aden was 682 Yemeni riyals for one dollar, while one dollar in Sanaa and the Houthi-controlled areas is equivalent to about 600 riyals, according to banking sources told AFP.

The value of the Yemeni riyal has declined about 15% in the south of the country in the past five weeks, and about 7% in the areas under the control of the Houthis.

In the Yemeni market, store stalls are crowded with vegetables, and as the value of the Yemeni riyal deteriorates, people feel uncomfortable because their already declining purchasing power has declined.

“The prices are very high and we no longer receive salaries. The situation is deteriorating and the whole country is from bad to worse,” said Abdo Obaid in Aden.

In Houthi-held Sanaa, residents also complained about the banning of new currencies.

Citizen Abdel Aziz Ali said that the ban “constituted great harm to us as citizens. Many of us have money from the new edition, but we are unable to buy our food for the day with these funds.”

The Humanitarian Coordinator in Yemen, Ramesh Rajasingham, warned this month to the UN Security Council of the risk of a new famine in this country.

“With the rapid deterioration of the value of the (Yemeni rial) and turmoil in the payment of salaries, we note again some of the main factors that made Yemen on the brink of starvation a year ago. We must not let that happen again,” the official told the CCTV Council.

– “blackmailing” the population.

The internationally recognized government has been running the Central Bank of Yemen from Aden, its temporary capital, since 2016, after it accused the rebels of using the bank’s funds to finance themselves, which the Houthis denied.

The transfer of the operations of the Central Bank to Aden led to the existence of two financial centers dealing with one currency, the first in the southern city, and the second in Sanaa.

The Sanaa Center for Strategic Studies confirmed in a recent report that the confrontation over new banknotes may lead to the collapse of the Yemeni riyal system, indicating that it has already pushed the country to use difficult currencies, especially the Saudi riyal and the US dollar.

According to the report, “the population, of whom millions have already reached the brink of hunger, will incur additional costs and further deterioration in purchasing power and in their living situation.”

In the center, Anthony Bizewell, a co-author of the report, said that in the Houthi-controlled areas, “people turn to the black market (…) in the hope of obtaining banknotes and pay additional costs to obtain them.”

In the south, Bezweel says that given the areas under the control of the Yemeni government “with less population density and less (economic) activity, there will be a surplus of newly printed banknotes … which will lead to inflation.”

According to the report, this decision will have a direct impact on the purchasing power of the population.

“The goods are entering (to Yemen). The issue is related to the purchasing power and the ability of people to buy the goods available in the market,” he said.

Yemenis complain that food prices have doubled at least twice since the war began in 2014, while a newspaper in Aden said that the value of the riyal fell 5 percent in just one week.

The government of President Abd Rabbuh Mansour Hadi denounced the prevention of the new banknotes, accusing the Houthis of “blackmailing” the Yemenis.

The Yemeni Minister of Planning and International Cooperation Najib al-Ouj told France Presse that “Prime Minister (Mueen Saeed) touched this with the European Union ambassadors. Indeed, we called for pressure” on the Houthis.

According to Al-Auj, the government will also discuss the issue with the United Nations.

The war in Yemen has been going on since 2014 between the Houthis who controlled the capital, Sanaa, and other parts of the country, and the forces loyal to the government of the recognized president, Abd Rabbuh Mansour Hadi.

The power struggle has killed tens of thousands, including a large number of civilians, according to humanitarian organizations, especially since the start of coalition operations against the rebels to halt their progress in neighboring Yemen in March 2015.

In addition to the victims, there are still 3.3 million displaced people, while 24.1 million people, or more than two-thirds of the population, need humanitarian assistance, according to the United Nations, which describes the humanitarian crisis in Yemen as the worst in the world today.

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