Yemen’s Escalating Currency Collapse and the Slow Death of Its People

Published October 3rd, 2018 - 10:57 GMT
A Yemeni woman holds onto YER (AFP/FILE)
A Yemeni woman holds onto YER (AFP/FILE)



The humanitarian crisis in Yemen, already considered the worst in the world, is set to worsen as its currency, the Yemeni rial (YER), rapidly loses its value.

The rial has lost more than 75 percent of its value since 2015, which has ground the economy to a halt and forced millions of Yemenis, already dependent on humanitarian aid and donations, to need it more than ever.

Because of the ongoing Saudi-led Coalition blockade on Yemen’s ports and the mismanagement of Yemen’s central bank, Yemen’s people are slowly dying, unable to afford or access basic goods and services.

Al Bawaba, using rough tallies from U.N. agency figures, estimates that over 100,000 have died since the war began, ten times that of the official figure. 

The Rial’s Vicious Downward Spiral and the Central Bank of Yemen

Graph Showing Yemen’s currency depreciation since March, 2015 (Rami Khoury/Al Bawaba)

Yemen’s currency is simultaneously experiencing depreciation and inflation. Depreciation occurs when the local currency loses value compared to an international currency like the USD. Inflation reflects the increase in the price of goods in the country, meaning if staple items like fuel and bread are becoming more expensive, then the currency is inflating.

Both work together to choke Yemen’s economy and restrict access to basic goods by impacting local purchasing power.

Starting with a pre-war exchange rate of 215 rials per U.S. Dollar (USD), the rial has steadily depreciated throughout the war. However, by late July 2018, the rial began rapidly losing value as the exchange rate with the USD shot up to 500 rials per USD.

By October 1, the rial had exponentially depreciated to 800 rials per USD, before Saudi’s recent $200 million cash infusion to the Central Bank of Yemen (CBY) lowered it to 700.

This temporary fix will not likely aid Yemen’s economy or prevent the slide of the currency. In February 2018, Saudi deposited $2 billion in cash to the CBY; money that has essentially been thrown into a black hole as it had no discernable positive effect to stabilize the Yemeni rial.

“The 2 billion dollar deposit temporarily halted the decline of the rial, but there are wider, structural issues at play here,” said Adam Baron, a visiting fellow at the European Council of Foreign Relations (ECFR), to Al Bawaba in an interview.


A policeman stands outside the CBY (AFP/FILE)

The war has caused the rial lose value, but the recent and rapid depreciation indicates that it’s not merely the three-year war causing the currency to slide. One of the biggest culprits behind the currency’s collapse is the CBY itself, which is broken and may be beyond repair.

Savaged by corruption and mismanagement, the CBY, which is tasked with stabilizing Yemen’s economy and currency, has become impotent.

Much of its leadership is actually outside of Yemen, preferring to reside either in Amman or Riyadh, preventing them from directly managing and overseeing the CBY’s policies. As a policy paper co-authored by the Sanaa Center for Strategic Studies and the Center for Applied Research in Partnership with the Orient puts it, “A properly functioning central bank is not possible without the physical presence of CBY leadership on location in Aden.”

The CBY reportedly maintains foreign currency accounts, which are technically illegal. One such account is with Ahli Bank in Saudi Arabia which had revenues from oil revenues deposited into it in other currencies.

Its leadership has also ordered the CBY to collects state revenues in cash taken from local banks. This method normally indicates high levels of corruption in revenue collection, since cash is untraceable and easily exchanged. It also depletes local banks’ reserves, restricting banks from being able to pay people’s salaries.

The CBY is being used as a tool of war.

In September 2016, about a year and a half into the war, Yemen’s president Abd Rabbuh Mansur Hadi, who is backed by the Saudi-led Coalition, moved the CBY from Houthi-controlled Sanaa to government-controlled Aden.

This effectively blocked thousands within Houthi-controlled territory from having access to the bank’s funds. Tens of thousands of Yemen’s public servants have not been paid in about two years.

According to Martha Mundy, a professor emeritus at the Londons School of Economics, “whereas until that time the bank had been paying the salaries of civil servants and persons on government payroll, this includes many medical staff, across the divides of Yemen, since then the bank has paid no government salaries in the areas under the control of Ansarullah [the Houthis] and its affiliates from the former Yemeni army.”

But even in Aden, the city the CBY operates in, thousands have taken to regularly taken to the streets to protest their economic vulnerability. On September 2, protestors blocked Aden’s major roadways with burning tires to demonstrate against skyrocketing prices for basic goods.

“There is no alternative to change the situation except popular revolution against corruption in all its forms,” one demonstrator told a Reuters reporter at the time.  “The people have lost confidence in everything around them.” Being close to the CBY has not given Aden’s residents a respite from the economic collapse.

In Feb 2015, the minimum cost for food for seven people a month was 17,366 rials. By Sep 2018, it reached 33,775 rials. Prices for fuel, wheat and other staple goods have also shot up, making them inaccessible in the market for millions.

To make matters worse, the people of Yemen depend almost entirely on imported goods to live: what little arable land the country had has been largely bombed out of existence by the ongoing war.

Putting all of this together, the rial’s depreciation is making imports more expensive while the war and inflation is making local goods more inaccesible or nonexistent. It’s a vicious downward spiral. As people can largely no longer pay for basic goods to survive, many are increasingly reliant on humanitarian assistance and donations.

The World Bank estimates that 22.7 million people are in need of humanitarian assistance in a country of 27 million people. The vast majority of Yemen’s people live in poverty, and almost ten million are at risk of famine.


The Slow Death of Yemen

A severely malnourished Yemeni child (AFP/FILE)

Having people rely on humanitarian assistance isn’t necessarily a death sentence, but in Yemen it is: the ongoing aid blockade of the county’s ports is cutting off the only lifeline for most Yemenis.

“The minute you have inflation… it becomes more difficult to have access to basic foods, especially in a country that has already suffered tremendous poverty and malnourishment rates,” Ai Kadri, an economist at the London School of Economics, told Al Bawaba.

“Depreciation in the currency when you have a high dependency on food imports, which the war has made much more severe, definitely taxes people out of their lives, not only out of their pockets.”

Almost immediately after Saudi Arabia and the U.A.E. militarily intervened in the Yemen civil war in March 2015, they imposed a naval and air blockade over many of its ports. At times, they have entirely restricted the entry of boats carrying humanitarian aid from docking in Yemen’s cities. Yet even as they ease access to the ports, humanitarian workers say their ships are still blocked by Coalition forces for weeks, subjecting their ships to multiple inspections.

This delays crucial goods from reaching Yemen and exacerbates the crisis.

Kadri explained to Al Bawaba that this constant deprivation is lowering the life expectancy of Yemen’s people. They are, in effect, slowly dying by the millions:  “You are basically shortening people’s lives,” with something Kadri calls “imposed scarcity.”

Even as Saudi and the U.A.E. donate billions in humanitarian aid and cash payments to the CBY, Kadri argued that this is intended to buy the loyalty of Yemeni people inside Coalition-controlled territory. After all, these donations are by and large not reaching civilians inside areas under Houthi control.



Though more people rely on imports than ever before to live, imports have actually significantly decreased since the war began. In 2014, Yemen was importing over $15 billion worth of goods. In 2016 and 2017, it has only imported about $7.1 billion.

The U.N. stopped estimating the deaths from the conflict in 2016 and put the death toll at around 10,000. However since Dec 2016, U.N. agencies have been using a quick statistic to point to the sheer magnitude of death happening in the country: one child dies, on average, every ten minutes. This rate was cited throughout 2017 and is still used in 2018.

That’s six deaths every hour, 144 per day and 4,320 a month. It’s been 21 months since Dec 2016, meaning over 90,000 children have likely died since 2016 alone. Adding 90,000 child deaths to the official figure of 10,000 totals over 100,000 dead, and this is drastically understating the actual number, as it does not take into account adult deaths since 2016 from the direct or indirect consequences of war.

This slow death will continue even after the country stabilizes. “The devaluation of the rial is something that is going to exacerbate the humanitarian situation by making it even more difficult for Yemenis to afford basic food products, the bulk of which are imported,” said Baron of the ECFR.

“This isn’t something that will simply go away if the conflict ends—the hangover of Yemen's continuing economic collapse will continue to loom long after the end of the conflict.”

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