On March 30, Yemen’s Houthi-led de facto government in Sanaa minted a new 100 riyal coin. This unprecedented move was made under the pretext of finding a solution to the growing problem of damaged banknotes.
But Yemeni analysts say this marks another step by Iran-backed militias in an alternative independent economy they have created, further threatening the war-torn country’s “peace and stability.” There is.
In response to what it described as a “serious escalation,” the Internationally Recognized Government (IRG) in Aden warned its citizens against using “counterfeit” currency, and in April A decision was made to request the relocation of the head office. Within 60 days to Aden.
Mostafa Nasr, director of the Yemen Research and Economic Media Center, said the directive was “necessary” but “difficult to achieve.”
“Early in the war, the Houthis seized $5 billion in foreign exchange reserves and 500 billion yen ($1.9 billion) worth of Yemeni bank deposits.”
“Financial institutions in areas under Houthi control need to find a framework to implement the new decisions issued by Aden. Otherwise, the entire banking system is under threat of collapse,” he said. explained.
The roots of the financial sector go back to 2014, when rebels first captured Yemen’s capital Sanaa, and the IRG’s decision two years later to move the central bank to Aden.
“However, in 2019, the Houthis decided to ban all newly issued IRG banknotes, citing inflation concerns, and instead relied on banknotes already in circulation in pockets under their control. “Concerns about an independent Houthi economy began to take shape,” Mohammed said. Kaftan, professor of economics at Taiz University, said: new arab.
The de facto government in Sanaa also pegged the exchange rate of the Yemeni riyal to the US dollar in 2019, leading to exchange rate disparity. In IRG-controlled areas, the official exchange rate has reached approximately 1,650 riyals, while in rebel-held areas it is set at approximately 560 riyals to the dollar.
“This broken dual real banknote system will only widen the financial divide and exacerbate the humanitarian crisis plaguing people,” Nasr said. new arab. “It is unreasonable to charge fees of up to 70% for sending money from government-controlled areas to Houthi-controlled areas, on which so many Yemenis depend.”
rise of empire
According to Wafiq Saleh, an independent economic journalist and analyst, this complete financial division that the Houthis aim to achieve will result in a total of $5 billion and 500 billion yen (1.9 billion It all stems from the seizure of Yemeni bank deposits ($). early days of the war.
During the same period, the rebels seized control over the financial markets of their territories, introducing 180 oil importers, 250 foreign exchange operators, and 1,023 trading companies, all of which were exempt from taxes and customs duties. Admitted. Meanwhile, many businesses in pre-war Yemen’s private sector were under pressure to close.
“These companies came out of nowhere and many of the CEOs operated as fronts,” said an anonymous source active in Houthi-controlled areas. new arab. “The Houthis have provided them with capital and all the facilities necessary to set up factories and import raw materials.”
According to 2018 World Bank data, nearly 35 percent of Yemeni companies have gone bankrupt since the start of the war, and more than 51 percent of surviving companies have experienced downsizing and downsizing.
“The new businesses introduced by the Houthis are endowed with a special status that gives them some privileges that many in the private sector are deprived of,” Qahtan said. “This allows the rebels to control the flow of investment into their territory.”
“Although the Houthis keep their balance sheets under tight control, the rebels generate revenues of approximately $1.8 billion annually, according to an internationally recognized government panel of experts.”
hostile takeover
The Houthis keep their balance sheets under tight control, but the rebels generate about $1.8 billion a year in revenue, according to an IRG panel of experts. While some of this revenue comes from the jurisdiction’s already established financial infrastructure, a significant portion comes from the customs sector, where the group has significantly increased fees in recent years.
The restrictions imposed on imported goods through seven newly established Houthi customs stations will result in customs duties 1,000 times higher than those collected at IRG ports, in a country where 90% of food products are imported. led to a significant increase in the prices of daily necessities.
“At the port of Aden, you pay about $1,300 in customs fees, but at Houthi ports you can pay up to $15,000 for the same goods,” said Majid Ahmed, who runs a small import business.
Another importer, who requested anonymity due to security concerns, said the amount paid at the port of Aden was less than 4% of the amount paid to the Houthis at customs.
Saleh said the Houthis also launched drone attacks on oil export ports in IRG in October 2022 and boycotted gas purchases from Safa, Yemen’s only producer under government control. The group is said to be waging a “war against the IRG’s economy” using a variety of tactics, including: Interfering with the importation of products from government-controlled areas.
Yemenis are suffering
Abdul Karim Haidar, a Taiz humanitarian worker, said the people are the most affected by all this, calling the economic situation “catastrophic”.
“I have worked with local and international aid organizations for years, but we are still unable to help these families meet their most basic needs,” he explained, adding that Yemen’s He added that hundreds of families are currently living in tents with only one source of assistance. Meals for the day.
“Cases of malnutrition are also increasing due to ongoing food shortages affecting the most vulnerable Yemenis.”
Citizens have reported a recent spike in taxes following the World Food Program’s (WFP) decision to cease operations in Houthi-held areas in December 2023.
In a press statement, WFP announced the suspension of its food aid program, citing lack of funding and failed negotiations with the Houthis. Negotiations lasted nearly a year and called for reducing the number of people eligible for aid from 9.5 million to 6.5 million, but no agreement was reached.
“Rebel groups are exploiting humanitarian aid as a means to control the population and further increase their financial resources,” Kaftan said.
The divisive financial policies implemented by the Houthis have led to rising prices across Yemen, with companies increasing their products and services in an attempt to profit from government-controlled areas to offset the burden of Houthi levies. A uniform price was imposed, and many people complied with it. He says he can’t afford it.
“Restrictions imposed on imported goods through the newly established Houthi customs customs impose duties 1,000 times higher than those collected at IRG ports, making life difficult in a country where 90% of food products are imported. This has led to a significant increase in the prices of essential goods.”
Since the fall of Sana’a, Jameel Rajeh, a teacher and father of six, has struggled to put food on the table.
“The rent used to be less than 70,000 yen, but now it has gone up to 80,000 yen. We had to move to a smaller room, but it still wasn’t enough,” he said. I did. “Eventually I had to reduce my diet to two meals a day.”
“The ban on exports from government-controlled areas has made everything worse. I work 12 hours a day and I can’t feed my family or keep them warm.” said Tawfik Al Sharbi, a resident of Sanaa, adding that the price of a gas cylinder used to be 2,000 yen. It used to cost $5 and now he’s triple the price.
Hesham Al Mahiya is a veteran Yemeni journalist who has worked with several local online and print news organizations.
This article is published in collaboration with Egab.