Yemen faces cash shortages despite currency stabilization efforts

In Yemen, the government's measures to stabilize the Yemeni riyal have led to a severe liquidity crunch. The Central Bank of Yemen, based in Aden, has shut down unauthorized exchange firms and centralized internal remittances. Despite the riyal's stabilization from about 2,900 to 1,500 to the US dollar, public frustration is rising due to a worsening shortage of cash in riyals.

Residents in government-controlled cities like Aden and Mukalla report unprecedented difficulties accessing cash, with many banks and exchange firms limiting conversions to as little as 50 Saudi riyals per person. Mohammed Omer, a grocery shop owner in Mukalla, stated, "I’ve gone from one exchange to another, and they refuse to exchange more than 50 riyals. It’s a waste of time and effort – I’ve had to close my shop."

The ongoing economic crisis, fueled by a decade-long war, has left both the Yemeni government and the Iran-aligned Houthis struggling to pay public-sector salaries and provide basic services. Government employees have expressed frustration over receiving salaries in low-denomination banknotes, which merchants often refuse to accept. Munif Ali, a government employee, shared a video of himself with stacks of 100- and 200-riyal notes, lamenting, "Merchants are refusing to recognize this. Legal action should be taken against them."

As the cash shortage continues, Yemenis are finding workarounds, relying on trusted shopkeepers for delayed payments or exchanging foreign currency at local groceries at unfavorable rates. Some well-connected individuals navigate the crisis more easily, while others face significant barriers. Khaled Omer, a travel agency owner, noted, "We work with a money exchange trader when we need riyals to pay salaries or meet basic expenses."

For traders importing goods, the cash crisis presents opportunities, as they can acquire Saudi riyals at discounted rates. A clothing trader in Mukalla mentioned, "As a businessman who sells goods in Yemeni riyals, I benefit from the cash shortage."

What to watch: The Central Bank's upcoming measures to address the liquidity crisis could significantly impact the economic landscape in Yemen.