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. 


Iranian VP and 1979 embassy hostage spokeswoman infected with coronavirus

Updated 27 February 2020

Iranian VP and 1979 embassy hostage spokeswoman infected with coronavirus

  • Massoumeh Ebtekar, who oversees women’s affairs, is being treated for the coronavirus
  • Mojtaba Zolnour, head of parliament’s national security and foreign affairs committee, also contracted the illness

TEHRAN: The coronavirus epidemic in Iran has cost 26 lives, the health ministry announced Thursday, with a vice president becoming the latest top official to be infected as the spread appeared to accelerate.
Health ministry spokesman Kianoush Jahanpour told a news conference that the tally of infections had risen to 245 with 106 more cases confirmed — the highest number for a single day since Iran announced its first infections on Feb. 19.
The Islamic republic has the highest death toll from the virus outside China, where COVID-19 first emerged.
Among the latest coronavirus sufferers is one of Iran’s seven vice presidents, Massoumeh Ebtekar, who oversees women’s affairs.
Ebtekar, a former spokeswoman for students who took 52 Americans hostage at the US embassy in Tehran in 1979, is being treated at home and members of her team have been tested, state news agency IRNA reported.
Mojtaba Zolnour, head of parliament’s national security and foreign affairs committee, also contracted the virus, appearing in a video posted by Fars news agency saying he was in self-quarantine.
The cleric is a deputy for the Shiite holy city of Qom in central Iran where the country’s first cases were detected.
According to media reports, among the deceased in Qom on Thursday was theologian Hadi Khroroshahi, who in 1981 was named Iran’s first ambassador to the Vatican.
The announcement by Zolnour comes two days after another top official, deputy health minister Iraj Harirchi, head of the government’s coronavirus task force, said he too had contracted the virus.
On Wednesday, Iranian authorities announced domestic travel restrictions for people with confirmed or suspected infections.
They also placed curbs on access to major Shiite pilgrimage sites, including the Imam Reza shrine in second city Mashhad and the Fatima Masumeh shrine in Qom.
Visitors to the shrines will be allowed to visit on condition they are provided “with hand-washing liquids, proper (health) information, masks,” Health Minister Saeed Namaki said.
They must “not gather together in groups but just pray and leave,” he said.
In a rare move, authorities announced the cancelation of the main Friday weekly prayers in Tehran, Qom and Mashhad as well as in the capitals of 22 of Iran’s 31 provinces and other infected areas.
School closures have been extended in affected areas and universities are to remain closed for another week starting from Saturday.
“All of these decisions are temporary and if the situation changes, we might intensify or ease them,” Namaki said.
In a message of thanks to doctors and nurses, Iran’s supreme leader Ayatollah Ali Khamenei said he hoped their efforts would help “eradicate this sinister virus soon.”
International health experts have expressed concern about Iran’s handling of the outbreak. But Tehran insists the situation has been “improving.”