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Fight for control of Yemen’s banks between the government, Houthis threatens to further destroy the economy

SANAA, Yemen: Yemen’s Houthi rebels and its internationally recognized government are locked in a battle for control of the country’s banks that experts warn threatens to further destroy an economy already crippled by nearly a decade of war.
Rivalry over banks is throwing Yemen’s financial system into deeper turmoil. Already, the Houthis who control the north and center of the country and the government that runs the south use different banknotes with different exchange rates. They also run rival central banks.
The growing currency divide is eroding the value of Yemen’s currency, the rial, which has pushed up prices of clothing and meat ahead of the start of the Islamic holiday of Eid Al-Adha on Sunday.
For weeks, Yemenis in Houthi-controlled areas have been unable to withdraw money from bank savings accounts because the Houthi-run central bank, based in the capital Sanaa, stopped providing liquidity to commercial and government banks . Protests broke out in front of some banks, dispersed by the security forces.
Yemen has been torn by civil war since Iran-backed Houthi rebels took over Sanaa and much of northern and central Yemen in 2015. The internationally recognized government backed by Saudi Arabia and its nominal ally, the Southern Transitional Council, a group supported by the United States. The United Arab Emirates governs the south and much of the east, with its center in the southern port city of Aden.
Yemen was already the poorest country in the Arab world before the war began. Punitive actions by each side against the other’s banks over the past week now threaten to undermine traders’ ability to import food and basic goods and disrupt the transfer of remittances from Yemenis abroad, on which many families depend, said Edem Wosornu, director of operations . and advocacy for the UN office for humanitarian coordination, known as OCHA.
“All these factors are likely to exacerbate poverty, worsen food insecurity and malnutrition and increase dependence on humanitarian assistance,” she told a UN Security Council briefing on Thursday. The dispute could escalate to the point where banks in Houthi-ruled areas are completely barred from international financial transactions, which she said would have “catastrophic ramifications”.
The internationally recognized government moved the central bank to Aden in 2016 and has since started issuing new banknotes to replace worn-out rials. The Houthi authorities, who have established their own central bank in Sanaa, have banned the use of new money in areas under their control.
In March, the Houthi-controlled central bank announced it would issue its own new 100-riyal coins. The international community and Yemen’s recognized government denounced the move, saying the Houthis were trying to create their own financial system and warning it would deepen Yemen’s economic divide.
Adding to the confusion, the notes have different exchange rates — riyals issued in Sanaa cost about 530 to the dollar, while those in Aden are around 1,800 to the dollar.
In response, Aden’s central bank gave banks 60 days to move their headquarters to the southern city and stop operating under Houthi policies or face sanctions related to money laundering and anti-money laundering laws. -terrorism.
The central bank was “forced to take these decisions, especially after the Houthi group issued its own currency and took unilateral steps towards full independence from the internationally recognized Central Bank of Aden,” said Mustafa Nasr, an economic expert and Head of Studies and Economic Media Center SEMC.
Neither bank met the deadline — either because they needed more time or because they feared Houthi sanctions if they moved, Nasr said.
When the deadline expired last week, Aden’s central bank banned transactions with six banks based in Sanaa, meaning currency exchange houses, money transfer agencies and southern banks could no longer work with them.
In retaliation, the Houthi-run central bank in Sanaa banned all transactions with 13 banks headquartered in Aden. That means people in Houthi-controlled areas cannot deposit or withdraw funds through those banks or receive wire transfers made through them.
Even as the battle for control takes place, both sides are facing a cash crunch. The Houthi government has few sources of foreign currency and its new currencies are not recognized outside its territory.
In January, the United States designated the Houthis as a global terrorist group in response to rebel attacks on shipping in the Red Sea and Arabian Sea. The Houthis say the attacks are in retaliation for the Israel-Hamas war in the Gaza Strip. Because of the US decision, banks around the world may be concerned and reluctant to continue any financial transactions with banks headquartered under Houthi control, said Youssef Saeed, an economics professor at the University of Aden.
The economy in Aden is not significantly better. Government revenues have been hit hard since Houthi attacks on oil ports in late 2022 forced a halt to oil exports, the country’s main foreign exchange earner.
Since March, depositors in Houthi-ruled areas have been unable to withdraw money from their accounts. Sanaa’s central bank has not announced any formal restrictions, but several economists told The Associated Press that it has informally stopped releasing funds that individual banks have put into its coffers — in part because of a lack of liquidity.
At one bank that saw depositor protests last month, the International Bank of Yemen, a note hanging in the lobby said: “In coordination with the Central Bank, withdrawals from old accounts have been suspended until further notice.”
Um Ahmed, a 65-year-old woman who was among those protesting outside the bank, said she was trying to withdraw money to help her son buy a scooter for work, but the bank refused.
“I served this country as a teacher for 35 years and I saved every penny and deposited my money in the bank but they took it all,” she said. “This money belongs to my husband, me and our children.”

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