Cash shortages grip Yemen despite currency stabilisation | Business and Economy News
Mukalla, Yemen — Efforts by the Yemeni government to stabilize the devaluing Yemeni riyal have led to a new challenge: a significant liquidity crisis.
The Central Bank of Yemen, operating from the southern city of Aden, recently implemented measures that include shutting down unauthorized exchange firms accused of currency speculation, centralizing internal remittances, and forming a committee to manage imports and provide traders with foreign currency.
As a result, the riyal’s decline has slowed, with the exchange rate recovering from approximately 2,900 riyals to the U.S. dollar several months ago to about 1,500 riyals today. While this stabilization was initially met with approval, public dissatisfaction has surged due to an increasing shortage of cash in the local currency.
Residents in government-controlled cities, including Aden, Taiz, and Mukalla, report an unprecedented lack of Yemeni riyals in the market. Many individuals, particularly those holding foreign currencies, say that local banks and exchange firms are either refusing to convert their money or severely limiting daily transactions to as little as 50 Saudi riyals per person, citing cash shortages.
This liquidity crunch has hindered many Yemenis from accessing cash or utilizing their savings during a time of escalating economic strain. The resulting difficulties have frozen business operations and prompted a black market where foreign currency is traded at unfavorable rates.
In Mukalla, grocery store owner Mohammed Omer has been unable to convert a few hundred Saudi riyals received from customers. “I’ve gone from one exchange to another, and they refuse to exchange more than 50 riyals,” said Omer, who has had to close his shop due to the cash shortage.
Yemen has been grappling with an economic crisis for over a decade, fueled by a conflict between the Saudi-backed government and the Iran-aligned Houthis, which has resulted in thousands of deaths and widespread displacement.
Both factions have targeted each other’s revenue sources, leaving the government and the Houthis struggling to fund public services and pay salaries.
During a board meeting in March, the Central Bank acknowledged the cash shortage and outlined various unspecified “short- and long-term” measures aimed at addressing the issue while pursuing conservative policies to stabilize the riyal and mitigate inflation.
Government employees have also expressed frustration as they receive their salaries in low-denomination notes, primarily 100 riyals, forcing them to carry their wages in bags. Munif Ali, a government worker, shared a video on social media showing himself with large bundles of low-value banknotes he received from the central bank. “Merchants are refusing to recognize this,” he stated, calling for legal action against them.
Those who have safeguarded their savings in Saudi riyals or receive remittances in hard currency, alongside military personnel paid in Saudi riyals, are among the hardest hit by the cash shortage.
To navigate the financial difficulties, many Yemenis have resorted to informal solutions. Some rely on established shopkeepers who allow for delayed payments, while others are exchanging foreign currency through local grocery stores at unendorsed rates. Some banks and exchange firms have begun offering online money transfers, providing relief for certain individuals.
In rural areas, where internet access is limited, the issue is even more pronounced. Saleh Omer, a resident of the Dawan district in Hadramout, recounted receiving a 1,300 Saudi riyal remittance from Saudi Arabia but being unable to convert it into Yemen’s local currency. “The exchange firm refused to convert it, citing a lack of cash,” he said.
Well-connected individuals have found it easier to navigate these challenges, often relying on personal contacts at banks and exchange firms for cash access. Khaled Omer, who operates a travel agency in Mukalla, mentioned that most transactions for his business are conducted in foreign currencies. When he requires Yemeni riyals, he turns to a trusted contact at a local exchange firm. “Exchange companies say they are facing a liquidity crunch,” he noted.
On social media, accounts of patients being denied medication due to health facilities refusing payments in foreign currency highlight the ongoing crisis. In Taiz, Hesham al-Samaan shared his experience of searching for someone to exchange currency to pay for a patient’s treatment. His post resonated with many others who reported similar frustrations.
For traders importing goods from Saudi Arabia, the cash crisis has presented a unique opportunity, as imported Saudi riyals are increasingly available at discounted rates. One clothing trader, who requested anonymity, noted that accepting payments in both Yemeni and Saudi riyals helps attract customers and secure the foreign currency essential for business operations. “Exchange companies need local currency I hold,” he said, “and they sell me Saudi riyals at lower rates.”
