DUBAI — Alongside a grinding seven-year military
conflict, Yemen's government and the Houthi rebels are locked in battle on
another front — a currency war that has opened up a gulf in riyal values.
اضافة اعلان
Both the government and the Iran-backed
Houthis used the
same notes until late 2019 when the rebels banned new banknotes printed in
government-run Aden, due to concerns about inflation.
The resulting difference in money supply has since seen the
riyal's value plummet to around 1,000 to the dollar in government areas, while
the value in Houthi-controlled zones has held relatively stable at 600.
Citizens and businesses in both government and rebel-controlled
zones have been left out of pocket by the divergence, but especially those in
the former, given rampant inflation there.
This internal exchange rate has also complicated trade and
led to manipulation by profiteers, to the detriment of most in a country on the
verge of famine.
"Right now, we have ... an exchange rate of the same
currency inside the country," said Amal Nasser, an economist with the
Sanaa Center for Strategic Studies. "This is bizarre from an economic
perspective".
According to Nasser, other experts and ordinary Yemenis, the
gap between the two currency values meant higher transfer costs between the two
zones.
Inflationary stimulus
Yemen's conflict has split the country between the mostly
Houthi-controlled north, and the south under the internationally-recognized
government which relocated the central bank to Aden after the insurgents seized
Sanaa in 2014.
The war has pushed the nation, long the poorest on the
Arabian Peninsula, to the brink of famine and economic collapse, with most schools,
factories, hospitals and businesses either destroyed or closed.
As the riyal plummeted to new lows in recent weeks in
government areas, the central bank there pledged to withdraw the series of
banknotes which had accumulated in its territory after the Houthi ban in late
2019.
The central bank in Aden was caught out because it had
expected the new notes to eventually spread evenly through both zones, but the
concentration of supply in the government zone stoked inflation there and
spurred the exchange rate divergence.
The government this month introduced a stockpile of what it
claims were old bills, drawing the ire of the rebels who accused it of minting
new, "counterfeit" money.
Rebel authorities also banned their use and issued civilians
with guides to identify the so-called "fakes" — something experts
said would be hard for an average citizen to do.
"Obviously, this new injection of money will affect the
economy negatively, increase inflation and affect the citizen's purchasing
power," Alaa al-Haj, an Aden resident, told AFP.
Yemenis were already battling soaring living costs in a
country where more than 80 percent of people are dependent on international
aid.
Houthis allege ruse
The Houthis have accused Goznak, a Russian state-owned
company, of colluding with the central bank of Aden to print "large
amounts of counterfeit currency" this year — "in particular 1,000
riyal notes" to pass new bills off as old.
Wahid al-Fawdai, an economic analyst and former adviser to
the central bank, said the bills the government recently put into circulation
had been in the central bank reserves for several years.
Neither Goznak nor the central bank commented when contacted
by AFP.
Social media and newspapers are rife with stories of
profiteers exploiting the unstable economic situation.
Some people have used the rate discrepancies as an
opportunity to cash in, including by using the newly issued "old"
notes in Aden to buy up those printed after 2017 at a discount of around 20
percent.
Experts spoken to by AFP believe that the new
"old" notes have a strong chance of permeating largely undetected
into Houthi areas, since they are hard to distinguish from the earlier old
notes.
Ultimately, this should help the central bank in closing the
gap in the exchange rate between the two zones, they said.
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