Yemen’s currency tumbles to a record low against the US dollar

Yemen’s currency has hit a new record low, causing prices to soar and worsening the humanitarian crisis that is pushing millions of Yemenis into the brink of starvation.

The riyal’s value plummeted Tuesday to around 1,071 to the US dollar in government-held areas as the Aden-based central bank is unable to bring the chaotic exchange system under its control.

In January 2019, a currency war between the Iran-backed Houthi rebels and Yemen’s internationally recognized government flared up, after the rebels banned the use of new banknotes issued by the government-run central bank in areas under their control, resulting in exchange rate divergence and runaway inflation, particularly in areas under the control of the Yemeni government.

In an attempt to solve the exchange rate divergence, the Aden-based central bank issued new banknotes similar to the old ones used in Houthi-held areas, expecting the new notes would eventually spread into Houthi areas.

However, the government’s move has had a diverse impact on the exchange rate divergence, as a result of not withdrawing the series of banknotes that had accumulated in its territory after the Houthi ban in late 2019.

On August 23, the International Monetary Fund (IMF) said it would send about $665 million worth of reserves to help ease an acute economic and humanitarian crisis in the war-torn country.

“The SDR allocation will boost Yemen’s foreign exchange reserves by over 70%, providing much needed support to help address the crisis, including with the many urgent food and medical needs of the population,” IMF regional representative Gazi Shbaikat said in a statement to Reuters.

Despite the announcement of the IMF, the currency kept deteriorating in government-held areas, where ordinary people are increasingly distressed at the loss in value of their cash, which is no longer enough to buy the basic needs.

“My salary is 120,000 rials. It was about 560 USD, but now it is almost 110 USD,” said Yasser al-Ariki, who works as an accountant in Tazi city. “Prices have gone so high, and my salary is now not enough to provide the very basic stuff for my family.”

The Houthi rebels, on the other hand, boast about maintaining a stable exchange rate in areas under their control, with 600 rials against the US dollar. Nevertheless, the economic situation does not seem to be any better, according to people in rebel-held areas.

Public servants in Houthi areas have been deprived of getting payed for almost three months.

“Yes, prices here are not as high as in government-held areas, but our suffering is even worse,” said Ibtisam Qaed, a teacher residing in lives in Sana’a.

“I only get paid half of my monthly salary every six months. This is not enough to pay for bus fees which takes me to and from the school I teach at.”

Until 2014, the Yemeni riyal was 215 against the US dollar. Then it started depreciating when the Iran-backed Houthi militia stormed Yemen’s capital, Sana’a, and ousted the Yemeni government, in September 2014, leading to the formation of an Arab coalition led by Saudi Arabia to restore the state and end the Houthi coup.