How a new Houthi-minted currency is widening Yemen's divides

Yemen's Houthi group sought no permission from any domestic authority when it decided last month to issue a new metal currency in a country plagued by an economic crisis.

On 30 March, the Houthi-controlled Central Bank of Yemen in Sanaa held a press conference to break the news to Yemenis: a new 100-riyal coin would be circulated within hours.

The announcement has sparked a heated debate across the country.

The group’s justification for issuing the new coin was to address the issue of damaged banknotes. As a consequence, citizens rushed to money centres in Sanaa to replace their obsolete bills with minted coins.

"The metal currency was coined according to international standards, and its circulation will not affect the exchange rates because it will only replace the damaged 100 riyal banknotes," Houthi-appointed Central Bank governor Hashem Ismael said.

"The currency clash between Yemeni rivals dates back to September 2016, when the Yemeni government moved the Central Bank from Sanaa to Aden. Since then, the country has had two independent central banks"

The move, however, has infuriated Yemen's UN-recognised government, as well as multitudes of anti-Houthi economists, politicians, and civilians. They say that printing or issuing a new currency should be subject to scrutiny and is a decision that requires consultation.

This latest development only adds to the many divides between warring parties in the country, heightening the sense of separation between North and South Yemen.

It has also pushed the Aden-based internationally recognised government to take countermeasures, which will deepen the economic crisis in Yemen. This, in turn, will exacerbate the country's humanitarian situation.

A new cycle of currency clashes

The currency clash between Yemeni rivals dates back to September 2016, when the Yemeni government moved the Central Bank from Sanaa to Aden. Since then, the country has had two independent central banks working to undermine each other. 

After 2016, the government-controlled Central Bank in Aden printed more banknotes, which were easily recognisable by their appearance.  

Opposing the government’s decision, the Houthi-controlled Central Bank in Sanaa in late 2019 banned the circulation of such banknotes in most of North Yemen, calling them "illegal". That ban led to a currency split, a crisis that persists until today. 

More recently, this conflict in the banking sector has intensified. In response to the Houthi-issued metal currency, the Aden-based Central Bank released an order on 2 April instructing all commercial and microfinance banks to relocate their main centres from Houthi-controlled Sanaa to Aden in two months.

If the concerned banks ignore the order, the Central Bank will apply procedures under Yemen's anti-money laundering and terrorism financing laws.

Yemeni economists say controlling the fallout of the rivals' moves is challenging.

Mustafa Nasr, the head of the Studies and Economic Media Center, told The New Arab that the Houthi issuance of a new denomination of Yemeni riyals "is a new escalation towards further monetary division which will fuel conflict in the Yemeni banking sector".

According to Nasr, this kind of development will isolate the economy in areas under Houthi control, and millions of citizens across Yemen will be impacted.

"This fresh phase of conflict will not only have negative repercussions on the Houthi group but will extend to the banking and economic sector of the country as a whole," Nasr told TNA.

"The deepening divide in Yemen's banking sector will contribute to derailing peace efforts aimed at stopping the decade-long military conflict"

A threat to peace efforts

The deepening divide in Yemen's banking sector will contribute to derailing peace efforts aimed at stopping the decade-long military conflict. It is an additional source of antagonism between the two sides and a massive blow to the trust-building process.

While the government is determined to compel commercial banks to relocate their headquarters from Sanaa to Aden, Houthi officials warn that such escalatory steps will not aid the peace process in Yemen.

Senior members of the Houthi group called on Saudi Arabia to take action and stop the Central Bank in Aden from proceeding.

Abdul Malik Al-Ajri, a senior Houthi leader and member of the group's major negotiators, commented on the government-run Central Bank's resolution, saying, "The parties keen on peace and the roadmap, especially the Kingdom of Saudi Arabia as the main party in [peace talks], must put an end to the childish absurdity of mercenaries".

Al-Ajri accused the United States of pushing the Central Bank in Aden to take escalatory steps to pressure the Houthis to end their support for Palestinians in Gaza, where Israel has killed over 32,000 people since October last year.

The US condemned the Houthis for releasing a new 100-riyal coin in areas under their control, saying that such a move will further divide Yemen's economy, jeopardise the integrity of its banking sector, and undermine its commitment to global regulations to combat terrorism funding.

"The United States condemns the issuance by the Houthis - a designated global terrorist group - of counterfeit coins to replace Yemen's legitimate currency. Counterfeit coins must not be further introduced into the market," the US Embassy in Yemen said on X.

However, the Houthi-run Central Bank in Sanaa responded by saying "it will continue to perform its national and professional role…and will confront any new conspiracies targeting the economy and livelihood of the Yemeni people".

Disintegration and suffering

The de-facto separation between Yemen's South and North is deepening as both rivals attempt to tighten their authority in areas they dominate. Today, the North has an independent bank, currency, army, and parliament. So does the South.

As the country keeps disintegrating militarily, economically, and politically, civilian suffering is intensifying.

Ahmed Nasser, a 28-year-old supermarket employee in Aden, is originally from Sanaa. "When I travel from Aden to Sanaa, I feel like moving from one country to another. The country's unity is dead, and even the currency I use in Aden cannot be used in Sanaa," he told TNA.

"The Yemeni government in Aden printed bills which the Houthis dub as illegal, and Houthis began issuing coins, which the government calls fraudulent. At the end of the day, we [civilians] are the victims of this conflict."

The writer is a Yemeni journalist, reporting from Yemen, whose identity we are protecting for their security.