The Houthis are strangling the economy in the south and imposing imaginary stability in the north
English - Thursday 24 August 2023 الساعة 09:41 am
Aden, NewsYemen, Heba Al-Bohry:
The Yemeni riyal continues to decline against foreign currency baskets in the liberated areas, which in turn was reflected in the prices of basic foodstuffs, which rose insanely; Because of the deportation of the Houthi militia to the liberated areas and the failure of the government to manage the crisis.
This decline has become a source of astonishment for economic observers, given that the government has economic solutions, but it ignores them. In view of this, the continued collapse of the riyal sparked a wave of criticism about the continued economic decline, despite the recent Saudi support that was supposed to address a lot.
Solutions
Economic journalist Wafiq Saleh divided the solutions to economic problems into short, medium and long term.
Wafiq told "Newsyemen" that the quick solutions are to work to mobilize financial support for the central bank and the government's haste to put in place urgent financial and economic reforms represented by reducing foreign exchange payments, and organizing the import mechanism that consumes hard currency from the local market in a huge way, in addition to activating the central bank's tools. Monetary policy, by tightening control over banking activity and controlling the money supply of the local currency in the banking market, and curbing speculation and demand for foreign exchange.
As for the other path to the solution, it is activating Yemeni exports, especially foreign exchange exports, unifying all revenue streams of the Central Bank, activating the state’s general budget, stopping the government spending process from inflationary sources, and activating state institutions such as Aden refineries in order to refine crude oil and finance the local market with fuel and oil derivatives. This will reduce the intensity of speculation by more than 50% on the one hand, and on the other hand will supply the state treasury with billions of dollars annually.
Al-Sayed considered the recent Saudi grant an important step to compensate the government's loss from the halt in exporting crude oil, as well as to help the government commit to paying salaries and providing the hard currency needed for imports in some areas.
He said that the importance of the current Saudi grant, estimated at one billion and two hundred million dollars, lies in the fact that it comes in light of the critical conditions the Yemeni economy is witnessing, and the worsening financial pressures on the state's finances, with the cessation of crude oil exports since last October, and the lack of local resources for the government.
Thus - Saleh adds - this grant at the present time is supposed to help the government carry out its tasks in paying the salaries of employees and spending on services, providing the hard currency needed to import oil derivatives, as well as achieving stability in exchange rates, maintaining the general level of prices and preventing supply or supply bottlenecks. Any commodity crises in the markets.
However, it is also required that the government take important steps accompanying the Saudi grant process in order to reflect on the stability of the citizens’ living situation, as the volume of needs facing the national economy is multiplying, and work to improve exchange rates and raise the purchasing power of the citizen needs other steps in addition to the Saudi grant. So that the latter is a catalyst in addition to what the government obtains from public resources in covering needs and expenditures and providing the necessary quantities of foreign exchange to finance import operations.
According to Saleh, the issue of the stability of the currency rate and the general level of commodity prices requires the formation of a foreign exchange reserve, which is not allocated to cover the basic expenses of the government such as paying salaries. Rather, these expenses are provided from local resources that the government collects in the national currency.
Illusion and security grip
Saleh explained the discrepancy in the exchange rate between the regions of the Houthi militia, Iran's arm in Yemen, and the liberated governorates. The market controls the exchange rate, unlike the legitimate government that adopts a free-floating system in the banking market based on the recommendations of the International Monetary Fund, and this gives the mechanism of supply and demand in the banking market the right to control the currency rate.
The other thing is that the Houthi regions are witnessing a severe shortage of the old edition of the currency, and this helps to curb the process of demand for foreign exchange, not to mention the intervention of the Houthi group to curb demand by strengthening the security grip on banking activity.
Al-Houthi deports the crises to the liberated areas
In addition, all banks, commercial companies, and businessmen in Sanaa depend on the banking market in Aden and the liberated governorates in order to provide hard currency to finance the necessary import of food and consumer goods, and this creates a wide demand for hard currency, in Aden and the rest of the neighboring governorates, says the economic journalist. Wafiq Al-Sayed.
In other words, Iran's arm is working to transfer crises in foreign exchange to the areas of the government, and this helps to raise the frequency of speculation and the deterioration of the value of the riyal from the new edition, in exchange for the old riyal price in Sana'a remaining constant at a certain level, because there is no banking market according to the free market economy. .
The journalist, Wafiq Saleh, confirmed in his interview with NewsYemen that this is not a real stability of the currency in the Houthi areas, because it is an imaginary stability governed by the security grip and is not a result of economic or monetary reforms, as it caused the monetary division, banning the new edition of the currency in the Houthi-controlled areas, and the continuation of the central bank. In Sana'a, it exercises its functions as a central bank, by issuing banking decisions, and interfering in the work of banks and banks, in Sana'a and the rest of the governorates under Houthi control, by accumulating liquidity from the new edition in the liberated areas in exchange for a severe scarcity of local liquidity, and the old riyal in the Houthis' exchange markets. This does not help in the existence of any currency speculation, not to mention the severe foreign exchange crisis that the banking markets in Sana'a and the neighboring regions suffer from.
In addition, the prices of commodities and foodstuffs are constantly inflated in Sana’a and the rest of the areas controlled by the Houthi group, and are rising day after day in light of the imaginary stability of the old riyal, meaning that this imaginary stability of the exchange rate is not reflected in the level of prices of food and services..on the contrary, We find that the living conditions of citizens are constantly deteriorating, and the life options are narrowing for the citizen, with the lack of means of earning, the absence of job opportunities and the suspension of salaries, and this confirms that the stability of the exchange rate for the Houthis is an inflated balloon, which does not necessarily reflect the existence of real factors and procedures related to reforms. Serious in the monetary and financial aspect.
Workers and wage earners in the public and private sectors are the biggest losers from the massive collapse in the exchange rate and the resulting hyperinflation, which decimated their purchasing power and brought the vast majority of them below the poverty line, especially with the complete collapse of basic public services.
