AL-MUKALLA: Yemen’s currency has tumbled to a record low against the US dollar despite fresh measures by the country’s central bank to bring the chaotic exchange system under its control.
The riyal hovered around 840 against the dollar early on Wednesday, plunging from 800 in recent weeks.
In an attempt to shore up the currency, the Aden-based central bank closed unlicensed exchange companies, banned the internal transfer network between exchange companies — known as hawala — and provided oil importers with dollars.
During a meeting with local moneychangers last month, central bank officials proposed initiating a formal method of transferring money under the bank’s supervision to replace the hawala system.
The bank’s measures helped the riyal to bounce back from 850 in September to 780 the same month before falling against the dollar to almost the same level on Wednesday.
Despite the bank’s repeated threats to punish local exchange companies that failed to adhere to the measures, many firms continued to operate the hawala system, wiring millions of dollars and Saudi riyals internally away from the central bank’s observation, officials at local companies told Arab News.
While Houthi rebels imposed a fixed exchange rate for local companies in their territories and had observers monitoring daily transactions, the central bank in Aden has largely failed to enforce monetary policies.
“No one has adhered to the measures,” an official at an exchange company in the port city of Al-Mukalla told Arab News.
The official, who declined to be named, said that the latest measures highlight the growing competition between the central bank in Aden and the Houthi-controlled counterpart in Sanaa.
“It is like a match between the two central banks. Each is trying to bring financial activities in the country under its control,” the official said.
In addition to the raging conflict in Yemen, economists argue that printing billions of riyals in new banknotes over the past four years, a fall in foreign remittances as well as oil and gas revenues, and misspending the Saudi deposit in the central bank are main reasons for the currency’s fall.
Ali Bawazer, a Yemeni economist, said that the latest plunge in the riyal shows that the central bank has lost control of the exchange market.
“Moneychangers’ speculation has led to the fall of the riyal and central bank appeals have been unable to stop them,” he said.
Bawazer said that the central bank should ask new exchange companies to deposit $1 million instead of the current $500,000 before a license is issued.
However, moneychangers have denied any role in the fall of the riyal, demanding the central bank and government tighten their grip on the market.
Subhi Baghafar, a spokesperson for Moneychangers Association in Aden, said that the riyal steadied in September after local exchange companies injected millions of dollars into the cash-strapped central bank.
“We stopped all buying and selling of foreign currencies and linked oil importing consultations with the central bank,” Baghafar told Arab News.
“The central bank should inject an adequate amount of foreign currencies into the market to achieve a real balance between supply and demand. It should reopen all external funds for importers,” he said.
Shrinking salaries
The fluctuating value of the riyal over the past five years has pushed up the cost of basic foodstuffs, fuel and rent, forcing many Yemenis to take more than one job to make ends meets.
Public servants who once boasted about their income are now battling to stay afloat since salaries have lost almost third of their value due to the falling riyal and a halt to annual bonuses.
Abu Abdullah, a government official from Al-Mukalla, told Arab News that in early 2015 his YR100,000 monthly salary used to cover all his family’s expenses with a few thousand riyals left to save.
“I used to have a decent life. Now the salary has not changed for years due to the suspension of annual bonuses. I spend the salary during the first half of the month,” he said.
