Houthi banknote ban sparks crisis in Yemen

Yemeni riyal banknotes are seen at the Central Bank of Yemen in Sanaa. The liquidity crisis has prompted exchange companies to freeze government salaries. (Reuters)
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Updated 20 January 2020

Houthi banknote ban sparks crisis in Yemen

  • Locals are bracing for a spike in fuel prices, which occurs when riyal dives

AL-MUKALLA, Yemen: Prices of basic imported goods increased 10 percent in government-controlled areas of Yemen this weekend — a result of the Houthi ban on newly printed banknotes.

“Importers told us the increase is due to the fall of the Yemeni riyal against the dollar and the Saudi riyal,” Mohammed, a shop owner in Al-Mukalla told Arab News.

The Iran-backed Houthis issued a ban on the use of banknotes released by the Central Bank in Aden, saying the move is meant to stop inflation and the deterioration of the Yemeni riyal against hard currencies. The Houthis have vowed to confiscate new bills and punish traders who possess or use them.

When the Houthis issued the ban a month ago, the Yemeni riyal was trading at 600 against the dollar.

The riyal has since fallen in value to around 650, forcing local importers to increase the prices of goods, and demonstrating
how areas liberated from the Houthis are still vulnerable to their economic decisions.

Locals are also bracing for a spike in fuel prices, which usually occurs when the Yemeni riyal dives.

Since December, Houthi-controlled areas such as Sanaa and other heavily populated areas in northern Yemen have suffered from a severe credit crisis that has pushed locals to exchange new bills with scarce and damaged old ones, or converting them to the dollar or Saudi riyal.

The liquidity crisis has prompted local exchange companies to freeze government salaries, exacerbating suffering in a country that is experiencing the world’s worst humanitarian crisis, according to the UN. 

“My agency managed to get rid of new notes here and there. We now only accept Saudi riyals or old bills,” a young man who runs a travel agency in Sanaa told Arab News on condition of anonymity to protect his identity. 

“Traders who have a lot of new bills smuggle them inside goods to be delivered to government-controlled areas, where they’re exchanged for old banknotes.”

The dollar is traded at 580 Yemeni riyals in Houthi-controlled areas, lending weight to economists’ speculation that the decision could create two economies, derail business between liberated areas and those under Houthi control, and boost currency arbitrage on the black market. 

Another repercussion of the ban is the unprecedented level of smuggling of hard and local currency between north and south.

In Al-Mukalla, local exchange companies told Arab News on Sunday that big traders in Sanaa smuggle hard currencies into liberated areas, where they are sold at higher rates. 

“They buy the dollar at 580 in Sanaa and sell it here at 640,” said Abu Awadh, a worker at a local exchange company who used a nom de guerre because he is not authorized to speak to reporters. Demand for the dollar and the Saudi riyal has decreased for the first time in years, he added.

Despite an abundance of the dollar in the market, the Yemeni riyal continues to plunge. According to local traders, the reason is that currency dealers move dollars between liberated areas seeking higher rates. 

The internationally recognized government in Aden, which has condemned the ban, appears powerless against its repercussions.

The Economic Reforms Team, a group of economic experts, warned that the Houthi decision could cause humanitarian, economic, social and political consequences. It urged warring parties in Yemen not to use the economy as a weapon. 

Algerian president’s son acquitted in high-profile corruption case

Updated 15 min 24 sec ago

Algerian president’s son acquitted in high-profile corruption case

  • Khaled Tebboune had been in pre-trial detention since June 2018
  • During his presidential campaign, president Tebboune said incarceration of his son sought to “punish” him

ALGIERS: The son of Algerian President Abdelmadjid Tebboune has been acquitted in a high-profile corruption case in which a prominent businessman was sentenced to prison, the national radio reported Thursday.
Khaled Tebboune had been in pre-trial detention since June 2018 in connection with alleged influence-peddling involving several senior officials, exposed after a cocaine seizure at an Algerian port.
An Algiers court acquitted him late Wednesday, while the principal accused, Kamel Chikhi, was sentenced to eight years in prison for “paying bribes in exchange for undue services,” in a case relating to construction permits and administrative authorizations.
The prosecutor had called for a two-year prison sentence for Khaled Tebboune, whose father did not have any official role at the time of his arrest.
Chikhi, known as “El Bouchi” (The Butcher), made his fortune in meat imports before becoming involved in property.
He was arrested in June 2018 after the seizure of 700 kilograms (1,500 pounds) of cocaine, found hidden in imported meat.
The investigation exposed a network of influence, with accusations that Chikhi, using cash and property, bought favors from high-level officials, magistrates and others within the regime of former president Abdelaziz Bouteflika.
Chikhi was sentenced to 10 years in prison last July on separate bribery charges.
A former mayor and the son of a former prefect were also sentenced Wednesday to six and four years in prison respectively.
While prime minister in 2017, Tebboune had launched an attack on oligarchs close to the state who were awarded huge public contracts.
He was sacked just three months after taking office but went on to win the country’s presidential election last December.
During his presidential campaign, Tebboune said the incarceration of his son sought to “punish” him for his 2017 attack.
Algerians took to the streets over a year ago to demonstrate against ailing Bouteflika’s bid for a fifth term.
The alleged links between Chikhi and Khaled Tebboune earned Abdelmadjid Tebboune the nickname “cocaine president” within the protest movement, which marked its one-year anniversary on February 22.
Bouteflika resigned in April last year after losing the support of the then-army chief in the face of enormous weekly demonstrations.