Yemen’s Financial Crisis: The Battle for Control of Banks
Yemen is facing a dire economic crisis as the Houthi rebels and the internationally recognized government fight for control of the country’s banks. This rivalry is wreaking havoc on Yemen’s financial system, further damaging an economy already devastated by nearly a decade of war.
The conflict over the banks has led to a deepening divide in Yemen’s financial landscape. With the Houthis controlling the north and center of the country and the government governing the south, different currency notes with varying exchange rates are being used. Additionally, both sides operate rival central banks, exacerbating the financial chaos.
The repercussions of this battle are significant, as it is eroding the value of Yemen’s currency, the riyal. This devaluation has driven up prices for essential goods like clothing and meat, particularly before the Islamic holiday of Eid Al-Adha.
Yemen has been embroiled in civil war since 2015 when the Houthi rebels seized control of Sanaa and much of the north and center of the country. The internationally recognized government, backed by Saudi Arabia, and its ally, the Southern Transitional Council, supported by the UAE, govern the south and parts of the east.
The ongoing dispute over the banks is not only affecting local businesses but also disrupting the importation of food and basic commodities. Additionally, it is impeding the transfer of remittances from Yemenis abroad, upon which many families rely. Edem Wosornu, director of operations and advocacy for the UN humanitarian coordination office OCHA, warned that these actions could deepen poverty, worsen food insecurity, and increase reliance on humanitarian aid.
The internationally recognized government relocated the central bank to Aden in 2016 and began issuing new banknotes to replace worn-out riyals. In contrast, the Houthi authorities established their central bank in Sanaa and prohibited the use of the new currency in areas under their control.
In response to these developments, the Aden-based central bank issued a directive for banks to relocate their headquarters to Aden and cease operating under Houthi policies. Failure to comply would result in sanctions related to money laundering and anti-terrorism laws.
Despite these measures, no banks met the relocation deadline, fearing Houthi reprisals if they moved. Consequently, the central bank in Aden banned dealings with six banks headquartered in Sanaa, while the Houthi-run central bank in Sanaa reciprocated by prohibiting transactions with 13 banks based in Aden.
Both sides are facing financial challenges amid this power struggle. The Houthi government has limited access to foreign currency, and its new coins are not recognized outside its territory. The US designation of the Houthis as a global terror group has further complicated matters, as banks worldwide may be reluctant to engage with institutions under Houthi control.
The economic situation in Aden is equally grim, with government revenues plummeting due to Houthi attacks on oil ports that halted oil exports. Deposit restrictions in Houthi-controlled areas have left many Yemenis unable to access their funds, exacerbating their financial hardships.
As Yemen’s financial crisis deepens, it is imperative for both sides to prioritize the country’s economic stability and work towards a resolution that benefits all Yemenis. Failure to do so will only prolong the suffering of the Yemeni people and hinder efforts to rebuild the war-torn nation.