Mukalla, Yemen – The Yemeni government’s measures to curb the devaluation of the Yemeni riyal have finally borne fruit, but they have created another problem: A severe liquidity crunch. The government’s central bank, based in the southern city of Aden, has shut down unauthorised exchange firms it says were involved in currency speculation, centralised internal remittances under a controlled system, and formed a committee to oversee imports and provide traders with hard currency. These measures have helped curb the riyal’s freefall, from about 2,900 to the United States dollar months ago to about 1,500 today, a move that was initially welcomed.
But the gains have been short-lived, as public frustration has grown over a worsening shortage of cash in riyals. People across government-controlled cities such as Aden, Taiz, Mukalla and others have said they are facing an unprecedented shortage of Yemeni riyals in the market. Many, particularly those holding US dollars or Saudi riyals, said local banks and exchange firms are refusing to convert foreign currency, or are limiting daily exchanges to as little as 50 Saudi riyals per person, citing a shortage of local cash.
This has left many Yemenis unable to access cash or use their savings in hard currency at a time of mounting economic pressure, paralysing businesses and giving rise to a black market where traders exchange foreign currency at more unfavourable rates to the customer. Mohammed Omer, who runs a small grocery shop in Mukalla, said he has spent hours crisscrossing the city’s exchange firms trying to convert a few hundred Saudi riyals he received from customers. Alongside the fighting on the battlefield, the warring sides have targeted each other’s main sources of revenue, leaving both the Houthis and the government strapped for cash, struggling to pay public-sector salaries and fund basic services in areas under their control.
At a board meeting in March, the Central Bank in Aden said it was aware of the cash shortage and had approved several unspecified “short- and long-term” measures to address the problem, noting that it is pursuing “conservative precautionary policies” to stabilise the riyal and curb inflationary pressures. Government employees have also complained that the cash-strapped Yemeni government is paying salaries in low-denomination banknotes – mainly 100 riyals – forcing them to carry their wages in bags. Munif Ali, a government employee in Lahj, took to Facebook to express his frustration, posting a video of himself sitting beside large, tightly packed bundles of 100- and 200-riyal notes that he said he received from the central bank.
Munif, like many Yemenis on social media, said traders are refusing to accept large quantities of low-value notes. To cope with cash shortages and the refusal of exchange firms to convert hard currency, Yemenis have adopted a range of workarounds. Some rely on trusted shopkeepers who allow delayed payments, while others exchange foreign currency at local groceries or supermarkets, often at lower, unfavourable rates.
Banks and exchange firms have also introduced online money transfers, which have helped ease the crisis for some. In rural areas, where internet access is limited and exchange shops are scarce, the problem is even more acute. Saleh Omer, a resident of the Dawan district in Hadramout, told Al Jazeera that he received a remittance of 1,300 Saudi riyals sent from Saudi Arabia.
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