The "currency war" between the conflicting parties in Yemen has caused economic chaos, leading to a civil war between one currency and two exchange rates | Yemen | Conflict
In 2014, the Housai armed forces in Yemen took control of the capital Sanaa, and a civil war broke out in Yemen, which has been 9 years since then. Yemen, deeply embroiled in war, is now experiencing a unique currency situation that is completely different from the rest of the world. The exchange rate of the official currency Yemeni riyal is completely different in areas controlled by the Houthi armed forces and the Yemeni government, respectively. It is precisely because of this difference that Yemen's economy, which has been plagued by war and constantly deteriorating, has been further affected.
△ Yemeni riyals circulating in areas controlled by the Housa armed forces and Yemeni riyals circulating in areas controlled by the Yemeni government
The two banknotes on the picture are the official currency of Yemen - the Yemeni Riyal. At first glance, these two banknotes have the same face value of 1000 rials, and even use the design pattern of Sana'a Old Town as the banknote, with only differences in size. Despite the slight difference in appearance, there is a huge difference in the exchange rate between these two banknotes. On the left side of the picture, the riyal currency circulating in the area controlled by the Husai armed forces has an exchange rate of 530 riyals to 1 US dollar. A banknote with a face value of 1000 riyals can be exchanged for 1.88 US dollars, equivalent to 13.70 Chinese yuan; The riyal on the right is circulated in the internationally recognized Yemeni government controlled area, with an exchange rate of 1430 riyals to 1 US dollar. This means that a 1000 riyal banknote can only be exchanged for 0.69 US dollars, equivalent to 5.03 Chinese yuan.
The Husai armed group refuses to recognize the new banknotes issued by the Central Bank of Yemen
In 2014, following the occupation of the Yemeni capital Sana'a and most of the northern region by the Houthi armed forces, the Yemeni government, which controlled parts of the southern region, was forced to relocate to the temporary capital Aden, and the Yemeni Central Bank also moved to Aden along with it.
△ The central bank of the Yemeni government relocated to the temporary capital Aden
The war severely damaged Yemen's economy. In 2016, the Yemeni government attempted to increase monetary liquidity by issuing new banknotes, but this measure was opposed by the Houthi armed forces, who accused the Yemeni government of "printing new banknotes without restraint"; The Yemeni government retaliated against the Husai militants for engaging in "economic destruction.". Both sides have been engaged in a standoff and have been deadlocked.
This situation persisted until 2019. In December 2019, the Houthi armed forces officially announced the abolition of the circulation of the new Riyal banknotes issued by the Central Bank of Yemen in 2016 within their controlled areas, and only recognized old versions of Riyal banknotes issued before 2015. The Husai armed forces also require the people in their controlled areas to exchange their new rials for old currency within a month, or simply exchange them for "electronic currency" issued by the Husai armed forces. Those who violate regulations by using new currency will face severe punishment, including imprisonment.
In the areas controlled by the Husai armed forces, although the exchange rate appears to be relatively strong on the surface, the reason is largely due to the long-term international sanctions imposed on the Husai armed forces and the relatively closed economic environment.
The chaos of the monetary system has seriously impacted the Yemeni economy
It has been almost four years since the two sides of the conflict in Yemen started a "money war", and Yemen is still deeply mired in civil war, with its economy constantly deteriorating. The riyal exchange rate in areas controlled by the Yemeni government has dropped from 640 riyals to 1 US dollar in 2019 to 1430 riyals to 1 US dollar now.
The chaos of the monetary system has increased the difficulty and cost of trade in Yemen
The use of paper currency accounts for a large proportion of daily consumption among the Yemeni people. The widening exchange rate difference has brought more inconvenience and pain to the people of Yemen. The implementation of the "banknote ban" actually created "two currencies" in Yemen, especially for merchants traveling between areas under the control of both parties. They had to buy and sell two types of "different paper and size" riyal banknotes, which greatly increased the cost of doing business and hindered internal trade between the north and south of Yemen. At the level of foreign trade, due to war and currency system chaos, Yemeni currency is no longer considered a reliable currency. Therefore, the prices of imported goods, including electronic equipment, construction materials, and raw materials, are priced in foreign currency. This also leads to a general lack of confidence among Yemeni businessmen and the private sector, exacerbating the already weak Yemeni economy.
