Saudi Arabia announced on Wednesday that it is transferring $2 billion to the central bank of Yemen to shore up the Yemeni riyal, which has depreciated alarmingly as the civil war in Yemen drags on.
The Saudis blamed Yemen’s civil war and attendant economic crisis squarely on Iran and its allies in Yemen.
“To address the deteriorating economic situation faced by the Yemeni people as a result of the actions of the Iranian-backed Houthi militias, King Salman bin Abdulaziz has issued a directive to transfer a $2 billion deposit to the central bank of Yemen,” the Saudi Interior Ministry said in a statement.
“The Houthis are exploiting this situation without any religious or moral deterrence to realize their own personal interests,” the Interior Ministry charged.
An AFP report notes that the Yemeni riyal traded at 215 to the dollar before the war, and is trading at 500 to the dollar today.
Adding to the fiscal chaos, Yemen actually has two central banks at the moment. The internationally-recognized government supported by Saudi Arabia moved the existing central bank to its de facto new capital in Aden, while the Houthi insurgents took control of the bank in the national capital of Sanaa.
“More than one million civil servants lost their jobs in the bank transfer, and both the Sanaa and Aden central banks have struggled to pay salaries,” AFP observes. The governor of the Aden bank also stated last year that the Saudi coalition aligned against the Houthis has blocked shipments of cash into Yemen because the coalition believed the Houthis were stealing the money.
Unemployment is an especially grim prospect in a company wracked by three years of civil war and teetering on the edge of humanitarian catastrophe. Yemeni officials reached out to Saudi Arabia for help with warnings that if the central bank collapses, famine will sweep the country. The Saudis responded with a $2 billion financial infusion even though their own economy is currently struggling.
A source close to the Saudi government told Deutsche Welle that the $2 billion is a “gift,” not a loan, and the legitimate Yemeni government will not be expected to repay it. The value of the rial reportedly rose 16 percent against the dollar on Thursday as news of the Saudi deposit spread. However, the Yemeni government order to cap the exchange rate at 390 rials to the dollar has been largely ignored.
The Financial Times quotes economist Amal Nasser of the Sana’a Center for Strategic Studies expressing guarded optimism that the Saudi deposit might “slow down the deterioration in the economic situation of the country and stop a further devaluation of the currency,” provided Yemen’s central bank shows proper leadership.
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