Yemen central bank suspends local money transfers

Yemen Central Bank’s (YCB) ban on local money transfer networks will today enter into effect. Officials hope the move will

Yemen central bank reuters

Photo: Reuters

Yemen Central Bank’s (YCB) ban on local money transfer networks will today enter into effect.

Officials hope the move will help dampen speculation that is contributing to spiralling inflation. The Yemeni riyal has dipped to record lows against the US dollar this year, heaping further misery on Yemenis who have suffered through the ongoing six-year civil war.

Following unbridled money-printing by the YCB—which remains loyal to the internationally recognised government—the Houthis outlawed newly printed Yemeni riyals, in effect splitting politically divided Yemen into two economies. Citing the YCB’s expansionary policies as reckless, the Houthis enforced the usage of older banknotes that quickly became a scarce commodity. In turn, inflationary pressures remain relatively more stable in areas controlled by the Houthis.

Despite belated action by the YCB, managing inflation will be difficult and is likely to aggravate the ongoing humanitarian crisis. The collapse of the riyal has led food prices to soar by 20% since January, heightening food insecurity and threatening the return of famines. Absent robust foreign exchange injections into the YCB, expect economic suffering to continue in one of the world’s poorest countries. With COVID-19 induced negative shocks elevating most international donor countries’ public debt and domestic spending, it seems unlikely that any significant bailout will arrive.

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