Yemeni Riyal Hits Record Low Against Dollar, Deepening Financial Crisis
The Yemeni riyal has reached a new low of 1,540 against the dollar in government-controlled territories, bringing it closer to its all-time low of 1,700 per dollar. This significant depreciation has been attributed to various factors, including the ongoing war in Yemen and the Houthi military takeover of power in late 2014.
Since early 2022, the Yemeni riyal had stabilized at around 1,200 per dollar in government-controlled areas. This stability was partly due to the formation of the internationally recognized Presidential Leadership Council, the return of the Yemeni government to Aden, and Saudi Arabia’s injection of cash into Yemen’s central bank.
However, the riyal began depreciating in early 2013 in response to the Yemeni government’s repeated requests for financial assistance following Houthi drone and missile attacks on oil installations. The depletion of financial reserves, coupled with the impasse in peace talks, further exacerbated the currency’s decline.
Saudi Arabia’s $1.2 billion funding aid provided some relief, helping the riyal recover to 1,300 per dollar in early August. Nevertheless, it hit an all-time low of 1,700 per dollar in late 2021.
The rapid devaluation of the riyal has had severe consequences for the Yemeni people. The cost of fuel, transportation, and vital products has significantly increased in government-controlled areas over the past few months.
In response to the currency crisis, Yemen’s central bank has implemented several measures. It closed unlicensed money firms, ordered local banks to submit financial statements, replaced the unofficial remittance system between exchange companies, and organized public auctions for selling dollars to local traders.
Despite these efforts, the riyal’s depreciation continues. The central bank recently pledged to take all necessary measures to stabilize the economy and limit the currency’s decline. It emphasized the importance of the Yemeni government effectively collecting revenues and depositing them into the bank, addressing resource imbalances, and improving the standard of living and services for Yemenis.
The Yemeni government attributes the riyal’s depreciation and the current economic meltdown to the Houthi military takeover of power in 2014. According to a recent report, Yemen loses $5 billion in revenue annually as a result of the Houthi coup and the subsequent war. The country’s exports have also significantly decreased from $6.4 billion in 2014 to $1.7 billion last year.
The financial crisis in Yemen has had far-reaching consequences. Government investment programs have decreased, private investment has reduced, and the GDP has contracted. Foreign investors have left the country, and local capital has fled abroad in search of better opportunities. Grant and loan programs have also been suspended.
The Yemeni people are bearing the brunt of this deepening financial crisis. The government’s report highlights the urgent need for a resolution to the conflict and the restoration of stability in order to revive the economy and improve the lives of Yemenis.
In conclusion, the Yemeni riyal’s record low against the dollar reflects the ongoing financial crisis in Yemen. The currency’s depreciation has had severe consequences for the Yemeni people, with increased costs of essential goods and services. The central bank has implemented measures to stabilize the economy, but the riyal’s decline persists. A resolution to the conflict and efforts to restore stability are crucial for reviving the economy and improving the lives of Yemenis.
Saturday, November 4, 2023