Yemeni rial declines as Houthi attacks escalate

News

Sat, 27-01-2024 04:22 PM, Aden

Aden (South24)

The value of Yemen’s currency, the Yemeni rial, declined significantly in Aden and other areas controlled by the internationally recognized government in South Yemen, as attacks by the Iranian-backed Houthis in the Gulf of Aden continue to escalate.

Today, in unofficial trading markets in South Yemen’s capital, Aden, the US dollar reached a purchase price of 1,588 Yemeni rials and sale price of 1,596, the lowest levels seen since December 2021.

A banking source in Aden told South24 Center that many foreign exchange companies have begun to think about stopping sales of the dollar and other foreign currencies due to the rapid deterioration in value of the local currency.

The decline comes after a series of Houthi missile attacks targeting commercial ships in the Gulf of Aden, the most recent of which was a missile attack yesterday on the British oil tanker Marlin Luanda, causing it to burn for several hours.

The targeted ship "Luanda"

The Houthis have been focusing their attacks on the Gulf of Aden since the US-UK strikes on sites linked to the Northern militia, which have continued since January 12.

The currency decline also comes less than two weeks after Aden’s Central Bank of Yemen announced that the second batch of the Saudi deposit, for supporting the Central Bank, had been transferred to its bank account in the Saudi National Bank.

The bank did not specify the value of the second installment, but on Wednesday announced an auction to sell 40 million US dollars at a price of 1570 rials per dollar.

Professor of political economy at the University of Aden, Mohammed Jamal Al-Shuaibi, identifies 3 reasons behind the significant decline in the value of the Yemeni rial: the cessation of government oil exports, the wrong monetary and financial policy of the Central Bank, and the Houthi military escalation in the Red Sea and the Gulf of Aden.

Al-Shuaibi told South24 Center: “The Yemeni government has not made any real reforms after years of issuing many cash editions without foreign exchange cover.”

Over the past few days, the market prices of some food staples and other commodities in Aden have increased significantly.

With shipping prices to Yemeni ports increasing up to three times what they were as a result of the Houthi escalation, the matter is likely to keep worsening, according to Yemeni merchants who spoke to South24 Center in a previous report.

In December 2021, the Yemeni rial sunk to the lowest value in its history against foreign currencies, when the price of one US dollar exceeded 1,750 Yemeni rials.

In contrast, the Yemeni rial has maintained remarkable stability in Sanaa and Houthi-controlled areas, at a selling price of 530 Yemeni riyals per US dollar, and purchase price of 525.

However, the prices of food and other goods in Houthi-controlled areas are no different from those in Yemeni government areas in relation to the purchasing power of the population, if not worse in some cases.