The Yemeni Riyal is the backbone of the country’s economy and it is used to buy everything from spare parts to basic foodstuffs. Its continued collapse would bear unimaginable consequences for the daily life of civilians.
SANAA, YEMEN — More than three years of U.S.-Saudi-led coalition war against Yemen has already created the world’s largest food security emergency. With millions of people currently facing starvation, the UN has described Yemen as the world’s worst humanitarian disaster.
Last week, panic entered Yemeni local markets and houses after a plunge in the value of the Yemeni Riyal (YR) accompanied by increasing prices for basic foodstuffs. Those who still have money rushed to convert their savings to USD or buy gold, but most Yemenis now face two grim prospects: either to die by U.S.-Saudi airstrikes or to die of hunger.
The YR has lost more than half of its value relative to the U.S. dollar — the owners of exchange shops and citizens in Sana’a and Aden told MintPress that the exchange rate of the YR against one dollar amounted to about 550 YR compared to 250 YR at the beginning of the war in the country.
The YR is the backbone of the country’s economy and it is used to buy everything from spare parts to basic foodstuffs. Its continued collapse would bear unimaginable consequences for the daily life of civilians. When a currency begins to slide, it is in part fear of such a continuing collapse and downward spiral that winds up fueling that spiral — a self-fulfilling prophecy.
We hear that fear growing in the questions of ordinary Yemenis trying to deal with the economic developments.
“A month ago, I was buying 50 kilos of wheat with 7,000 YR ($12); now it costs 13,000 YR. Now how can I bring food for my children?” asked 50-year-old Abdulkhaliq al Kholani, father of seven and a civil servant employed by Red Sea Ports Corporation in Hodeida. Al Kholani then said, “If they do not die by Saudi airstrikes they will die of hunger. We do not have a choice.”
An official of Yemen’s Central Bank said that never has the YR experienced such depreciation. Fadhl Abass, a Yemen economic analyst, said to MintPress that moving the Central Bank to Aden, the cessation of oil exports, and targeting economic facilities are among the factors contributing to the collapse of Riyal.
On January 17, 2018, Saudi King Salman confirmed that a deposit of $2 billion would be paid to the Central Bank in Aden. However, the Central Bank did not receive the promised deposit from the Saudis, according to a source in the Bank, who confirmed that was among the factors weighing on the YR and causing a general collapse.
An additional factor was that the government of Yemen’s former president and a staunch ally of Riyadh in Aden, received fresh Riyal banknotes from the printers in Russia, but the Central Bank did not have the foreign currency reserves necessary to guarantee the Riyal’s value at the official exchange rate. This also was a cause of the YR’s collapse.
The Dean of the Faculty of Commerce and Economics at the University of Sana’a, Dr. Mishal Al-Rifi, said that the government of Yemen’s former president’s act of printing more than one trillion YR without a cover of foreign currencies caused the collapse of the YR against the dollar and led to a dramatic rise in prices.
In the past, Saudi-led coalition mercenaries sought to boost liquidity by printing money, but the Riyal plunged from 250 to the dollar to 350 after the first batch of newly printed notes was rolled out last year. The Riyal traded for 450 to the dollar by year’s end and this week crashed to around 550.
The governing authorities in Sana’a quickly recognized the Riyal’s collapse and moved to restabilize the currency by requesting the assistance of private banks and financial institutions, but many Yemenis see the solution in Riyadh and Washington.
Yemenis take the street to condemn “the economic war”
Facing this new type of bombardment, al Kholani, along with tens of thousands of Yemenis, took to the streets of Sana’a Friday to condemn what they called “the economic war launched against their country” by the U.S.-Saudi-led coalition — which has decimated the ability of most Yemenis to purchase food, accelerating the spread of famine in a nation that imports nearly 90 percent of its nutritional needs.
Defiant residents marched to Bab al Yemen, east of Sana’a, under the slogan “Americans and Saudis are makers of high prices,” carrying placards and Yemeni national flags and chanting slogans against U.S. and Saudi Arabia, expressing their anger at the current economic crisis that the Saudi-led coalition`s war has created in their country.
“The collapse of the Riyal doubled the prices of food,” one of the demonstrators said to MintPress, adding, “This pushed us to the street to condemn the economic war that has been launched by the U.S. and Saudis.” Yemenis are also suffering because of power outages, lack of oil derivatives, and the spread of cholera.
For his part, the undersecretary of the ministry of finance, Abdul Salaam Mahtouri, called during the demonstration for a refusal to deal with the new currency, boycotting Saudi and UAE goods, and not worsening the crisis by scrambling to buy goods.
Moving Bank to south Yemen is among the factors that have been weighing on the Riyal
Al Kholani, like millions other Yemenis, has been faced with destitution, as his salary has gone unpaid for more than 20 months after the Saudi-led coalition moved the Central Bank from the capital of Sana’a, to the southern port city of Aden. But collapse of the local currency could further worsen the situation of al Kholani and more than 22 million others in Yemen.
In fact, since the relocation of the Central Bank in September 2017, with no positive economic justification, the local currency has lost more than half its value against the dollar and soaring prices have put some basic commodities out of reach for many Yemenis.
But to the Saudi-led coalition, moving the Bank was part of a longer-term strategy to capture political and economic control of Yemen, without taking into account disastrous results to civilians who live amidst the world’s worst humanitarian disaster.
The Saudi blockade — compounded by the Saudi coalition’s targeting of Hodeidah port, which is the lifeline for the majority of Yemen’s population — has sent the price of basic goods in Yemen skyrocketing.
Mohammed al Hussani, a Yemeni economist, told MintPress:
If the currency did collapse, there is no real alternative due to shortage of foreign currency, blockade and collapse of Yemen’s economy, and the absence of a functional central bank in particular.”
Imports are purchased on the international markets in dollars, which means that there is lack of the U.S. dollar in circulation in Yemen, especially as those holding large quantities of YRs are seeking the stability of the USD, creating a flight of capital from the country.
Economic strangulation as a weapon of war
The U.S.-Saudi-led coalition has used systematic economic strangulation as a weapon of war — targeting jobs, infrastructure, food markets, factories, and the provision of basic services. The coalition claims it is targeting economic sites being used for military purposes, which it therefore considers legitimate military targets.
The coalition has deliberately sought to inflict widespread damage to Yemen’s production capacity. According to a statement by the Legal Center of Rights and Development to MintPress, Saudi airstrikes targeted 14,375 civilian economic structures — including factories, commercial warehouses, food, medicine, electricity, and fuel supplies. Many of these economic facilities were forced to curtail their production, and hundreds of workers lost their livelihoods.
“Increased price of food, transport, and medicine made it difficult or impossible to us to afford basic needs,” Fahd al Reimi, who has a family of 12 persons, said to MintPress. He lost his job after workplaces came under attack.
You can see the scars of economic warfare everywhere you go. When you drive the road from Sana’a to the port of Hodeida, one of Yemen’s main economic arteries, you will see five bridges destroyed, and the ruins of more than 10 factories, as well as the chassis of food and fuel tankers that have been targeted by Saudi airstrikes.
In an overcrowded nutrition clinic at Maternity and Childhood Hospital in Sana’a, you see 18-months-old Safa with stick-thin legs and distended tummy; she weighs just 3.5 kg, indicating severe malnutrition. More than 20 children are there in the hospital’s emergency stabilization center for severely malnourished children, which is supported by Save the Children’s emergency feeding program. “I just don’t have the money to feed them or buy medicines; what can I do?” Safa`s anxious mother, Sama, told MintPress.
One-and-a-half million kids — like Safa — are suffering from malnutrition. Unlike Safa, most of them never see a health clinic or receive treatment. Many of those who survive will be affected by stunted growth and poor health for the rest of their lives. Many Yemeni children are dying every day from lack of food, medicine and clean water; even more than from fighting. But the collapse of the Riyal will bring yet worse to them.
Tamer Kirolos, Save the Children’s Yemen Country director, summed it all up:
With the economy in tatters and health and sanitation facilities throughout the country destroyed, conditions are now rampant for disease and starvation to spread. Aid agencies are doing what they can to keep people alive but ultimately our efforts are just a sticking plaster on a gaping wound.”
Top Photo | Two children walk along a market street in the capital San’a, Yemen, Dec. 3, 2008. Even in Yemen’s breadbasket, people are having trouble feeding themselves in what food experts say is a hidden but growing hunger problem across this impoverished country, the poorest in the Middle East, that could push it to collapse. (AP Photo/Paul Schemm)
Ahmed AbdulKareem is a Yemeni journalist. He covers the war in Yemen for MintPress News and local Yemeni media.