By /Mareb Al-Ward
The economic decisions taken by the Central Bank of Yemen in Aden to stop dealing with six banks and exchange companies, in light of pressure to transfer their headquarters from Sana’a to Aden and gradually withdraw old banknotes, seem to be in the context of its efforts to end the currency division and protect the banking system from collapse. However, there are other indications in reality that say that these decisions cannot be separated from the noticeable tension between Saudi Arabia and the Houthis, and the statements of the US ambassador to Yemen, which frame them in a broader context beyond the local and purely economic dimension, each with its own goals; the Saudis want to return to their shared understandings, and the Americans seek to stop their attacks in the Red Sea.
The bank justified its decisions towards the banks due to their “non-compliance with its instructions and violations of banking rules and legal provisions,” as the deadline it had set for commercial banks in Sana’a to transfer their operations centers became soon. What was noticeable in these decisions was the bank’s resort finally to the option of withdrawing all banknotes printed before 2016, and giving those who hold them two months to replace them.
But what is the impact of these decisions on the Houthis? Dr. Muhammad Qahtaan, a professor of economics at Taiz University, answers that commercial banks in Sana’a may transfer as much as possible of their balances and investments abroad, which will deal a severe blow to the Houthi economy. This will lead to an increase in demand for foreign currencies and increase pressure on the Yemeni riyal until a foreign currency liquidity crisis occurs in Sana’a, according to what was quoted by the “Yemen Future” website. The same source quotes Mustafa Nasr, head of the Center for Economic Studies and Media, warning of further currency division if the matter is not dealt with within the framework of a unified policy and expects the country to enter a catastrophic economic isolation if the escalation between the two parties continues. On the other hand, the economic expert believes that the success of the bank in implementing its decisions depends on the support it will receive from Saudi Arabia, and suggests neutralizing banking activity from the conflict within agreed-upon professional rules.
The internationally recognized government in Yemen is facing severe financial constraints, with average monthly revenues deposited into the Central Bank of Aden falling to around 26 billion Yemeni riyals in recent months. The financial deficit is being covered by a Saudi “deposit,” according to Mohammed Halboub, head of the state-owned Ahli Bank. This financial deficit is attributed to a number of factors, including rampant corruption within the government and its apparatus, in the absence of any oversight and accountability from the relevant bodies such as the Supreme Commission for Combating Corruption, the Central Organization for Control and Auditing, the Public Funds Prosecution, and the House of Representatives.
It is unfortunate that this factor is not being discussed in the context of analyzing the financial crisis, neither by the government nor by the chorus of those who applaud it. This is because it would highlight the absurdity and waste of public funds on illegal and unproductive appointments to the already bloated state administrative apparatus. These appointments include senior positions such as deputy ministers, undersecretaries, and an army of advisors whose salaries are paid in dollars, equivalent to the salaries of thousands of employees in the local currency (Haloub mentioned that the monthly expenditure on what is called “living expenses” is 12 million dollars, and some say the figure is higher). Another example of corruption is the electricity file, on which only last year one trillion and ten billion riyals were spent, according to Prime Minister Ahmed bin Mubarak, who illustrates the extent of corruption by saying, “For example, the fuel that was being bought for $1,200 a ton, we will now buy it for $760 a ton.”
In addition, revenues were affected by the Houthi decision to stop oil exports abroad, which led to losses estimated by Bin Mubarak at $2 billion. His predecessor’s government failed to fulfill its duty to resume exports in any form, despite its head’s statement that they would not stand idly by and would not allow the economy to be harmed, and that the government would do everything necessary to preserve this resource.
Against this backdrop, the decisions of the Central Bank of Aden, which is internationally recognized and considered part of the government itself, have come to be seen as an attempt to salvage what can be salvaged from the banking system and move towards ending the currency split.
The Houthis undoubtedly bear a great deal of responsibility for this economic quagmire due to their policy of plundering the foreign reserves before the decision of moving the Central Bank’s headquarters to Aden, in addition to pressuring private banks to place most of their deposits with the Central Bank in Sana’a, including the money of depositors, which resulted in its inability to enable them to withdraw the amounts they want whenever they want. The final blow was their decision to refuse to deal with the new currency in December 2019. This exacerbated the currency split and there became two currencies and two banks, each with its own policy, the price of which is paid by the citizen first and foremost, and then by the banking sector in general.
This situation has led to the collapse of the currency and the breaking of the back of the citizen who is already suffering and consuming his savings, and his suffering increased due to the commission on remittances from government areas to Houthi areas, which sometimes reached twice the amount sent itself. If the transferred amount is one hundred thousand Yemeni riyals, the commission is two hundred thousand riyals.
To bring the scale of the tragedy and disaster closer since this decision was taken in 2020, although only those who have experienced it will feel it, imagine someone who sends his family 50,000 riyals monthly, its commission is half the amount on average and sometimes twice it, so the result will be His loss of 175,000 riyals if the commission is half the amount for 7 months, while the commission for this amount was 35,000 riyals. However, if the commission is double the amount for five months, he loses two hundred thousand riyals, and thus his total loss in one year only is 375,000 riyals, which he was more entitled to. You can extrapolate from large amounts and increase the number of months of doubled commissions.
It is a tragedy that some see as more severe than the war itself, as it has pushed thousands of families into the list of poverty and need, forced others to sell their savings to cover their obligations, and left others suffering from deprivation due to their inability to regularly transfer their family’s income and their inability to secure the transfer commission, which he barely managed to afford the family’s expenses with great difficulty.
In the face of this catastrophic reality, no efforts have succeeded in pushing the Houthis to back down from their decision to refuse to allow the currency to circulate, because they considered it a consolidation of their political authority on the one hand and an opportunity to collect as much as possible of the new edition from what falls into the hands of those who deal with it, traders or money changers, on the other hand, to benefit from it later in buying foreign currencies from government areas and increasing their reserves of this currency. All of this had a profound impact on doubling the suffering of the people, as state employees in their areas of control who receive their salaries from the government, such as university professors, teachers, and judges, lose large sums in the form of transfer commissions. More than them bear the losses of those citizens who work in government areas and send monthly remittances to their families.
On the other hand, the government did not take any step to thwart the Houthis’ efforts and fail their policy and left the citizen an easy prey for them. It is the one who printed the new currency that was the pretext without any guarantee of its circulation in all areas, which made it lose public confidence, although there were options available that could be taken, including the gradual withdrawal of the old currency from the market as happened recently in the bank’s decision. This casts doubt on the motives behind the timing of the decisions, not their usefulness at all, because if the motive was to ensure the economy and the livelihood of the people and end the division, such measures or others would have been taken at that time or after Ahmed Al-Ma’baki assumed the position of Governor of the Bank. But to say after all this wasted time and the exorbitant price that the citizen has paid in particular, “It is better to come late than not to come” has no meaning because logic dictates holding the negligent officials accountable, not rewarding them for what they should have done yesterday instead of today.
There is no dispute about the right of the Central Bank to take policies and measures that protect the banking system, currency stability, and unify monetary policies. But the question is: can the bank carry on implementing its decisions to the end? And on what does it rely on to support the illegitimacy of its functions?
The data indicate that these measures are a political war with economic tools, and they are an extension of the battles that erupted from time to time and are resolved by the envoy or the private sector. The war may seem local in its edges and goals, timing, but it is not so in its entirety.
Saudi Arabia appears to be behind the bank’s decisions, as it is the primary supporter of the bank and the government through high-interest loans known as “deposits.” It is now using the bank’s card to achieve its interim goals with the Houthis, just as it used the card of the army and resistance in the past to open this or that front in line with its immediate goals at the time. The motive and goals behind the economic move are to pressure the Houthis to move forward with the negotiation agreement between them that was reached before the October 7 events in Gaza. Leaks indicated that it would be announced at the beginning of this year, but those events and the Houthis’ interference in them through attacks against ships in the Red Sea put the agreement on hold.
The scarce information available indicates that the Houthis are no longer enthusiastic about pursuing this agreement because they want to add other gains to it as a result of their actions at sea. This is what Saudi Arabia, which is keen to reach a settlement with them, does not want. Hence, its economic pressure on them, which explains their accusation that it is behind the bank’s decisions, which it believed that managing the battle in the name of the bank and with goals in the national interest would make it distant from it.
The other problem for Saudi Arabia is that America refuses to go ahead with this agreement because of the Houthi attacks, and its objection focuses on the part related to paying the salaries of military personnel, many of whom the Houthis have replaced with their own people and recruited thousands of others. Washington considers handing over the salaries that Riyadh is said to have pledged to pay for six months to be a reward for their actions against maritime navigation. Here, Saudi Arabia faces two problems: the first is that the Houthis want more gains than those they achieved in the agreement, and the second is that even if they agree to go with what was agreed upon, US will not accept it, and it is natural that there will be no settlement without its approval.
It is clear that the bank’s enthusiasm and its announcement that it will remain in session to confront the Houthis’ measures and its insistence on implementing its decisions by adhering to the deadlines given to the banks reflect Saudi support to achieve the required pressure that intersects with local economic goals in this aspect. It is impossible to imagine going ahead with this without it, as it is the one that provides the government with the means of life by financing the financial deficit and paying the salaries of its officials and employees abroad from what is called “the deposit.”
We should also not forget that US is the international supporter of the central bank by virtue of its influence on the World Bank and the International Monetary Fund. These global financial institutions are indispensable for any government bank, and without it, the bank would not have been able to restore the “SWIFT” service for bank transfers between local and foreign banks, which is absolutely essential. This support is linked to the government and the bank carrying out reforms that the US ambassador to Yemen described as difficult. These reforms relate to combating money laundering, placing the local banking system under the supervision of the bank, adhering to transparency, and ending the currency split. The latter will not be easy, regardless of the extent to which the bank may succeed in reaching it through its measures, as it is linked to the political solution more than anything else or the military defeat of the Houthis.
In conclusion, the political dimension in this battle cannot be ignored, and there is an overlap of interests between Saudi Arabia, America, and the Yemeni government to implement the economic decisions, and each party has its own goals. The important thing is that everyone should take responsibility for going all the way and that the usual settlements are not repeated and the battle stops in the middle after the Yemeni citizen has paid the price from his strength as he used to pay the price from his blood, and the result is a settlement that satisfies the Houthis before anyone else, and there is a fear that the settlement will be in the language of guns.
