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Yemen's other war frontline: The central bank



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Cashiers sort through large stacks of money inside a ragged building that is Yemen’s central bank, another frontline in a ruinous conflict as it fights to stave off economic collapse.

The Arab world’s poorest country is crippled by a humanitarian crisis, with images of skeletal children in famine-like conditions grabbing global attention, but economic dysfunction appears to be at the heart of the problem.

Yemen is afflicted by what diplomats call a famine of jobs and salaries, with the central bank — headquartered in the government’s de facto capital Aden — torn between the two warring parties.

Running the economy from a building pocked with bullet holes in the southern port city, the bank is scrambling to revive a currency that has lost two-thirds of its value since 2015, exacerbating joblessness and leaving millions unable to afford basic food staples.

The central bank expects a $3 billion cash injection from Gulf donors Kuwait and the United Arab Emirates to prop up its sagging currency amid soaring inflation, its deputy chief Shokeib Hobeishy said in an interview last week, without giving a timeline.

yemeni war

A bank teller counts money at the Central Bank of Aden in Aden on December 13, 2018. Yemen’s central bank expects a $3 billion cash injection from Gulf allies Kuwait and the United Arab Emirates, an official said, as the war-battered country seeks to prop up its sagging economy. PHOTO | SALEH AL-OBEIDI | AFP

The potential lifeline, if confirmed, would follow a $2.2 billion infusion by Saudi Arabia to the depleted reserves of a bank that appears ever more dependent on international handouts.

Hobeishy acknowledged that the bank was struggling to assert authority over its branches outside government control, including in Sanaa, which was seized by Iran-aligned Huthi rebels in September 2014.

A wounded Yemeni rebel

A wounded Yemeni rebel is on December 3, 2018 transported by ambulance to the the Sanaa International Airport before being evacuated to the Omani capital Muscat for treatment. PHOTO | MOHAMMED HUWAIS | AFP

The government moved the bank’s headquarters from the capital in 2016 following suspicion that the rebels were plundering its reserves to finance their war effort. The rebels deny the claim.

The relocation practically left the country with two parallel centres of fiscal policy dealing in one currency.

Yemen’s rivals reached a truce accord last week, but conspicuously absent was an agreement on economic cooperation as the Huthis rejected government calls for the Aden central bank to handle public sector salary payments on both sides, a diplomat who attended the talks told AFP.

A car is burning in Yemen

A car is burning at the scene of a suicide car bombing at the defence ministry in the Yemeni capital Sanaa on December 5, 2013. PHOTO | STR | AFP

The central bank is now “arguably the most dangerous frontline in the Yemen war”, said Wesam Qaid, executive director at Yemen’s Small and Micro Enterprise Promotion Service.

“The death toll as a result of bombings or land mines and military operations stands in the thousands,” Qaid told AFP.

“Many more have died as a result of poverty, starvation, poor healthcare as the central bank is caught up in the conflict.”

Yemeni soldiers

Yemeni soldiers ride a tank after taking hold of a major Al-Qaeda stronghold Azzan in the southern province of Shabwa, on May 8, 2014. PHOTO | STR |AFP

Yemen’s economy has contracted by 50 percent since the escalation of conflict in 2015 and inflation is projected at over 40 percent this year, according to the World Bank.

A weakened currency has diminished the purchasing power of millions and the private sector is haemorrhaging with businesses shutting down or making layoffs.

New Prime Minister Moeen Abdulmalik Saeed, appointed in October, said he was seeking to revive oil exports that once contributed about three-quarters of state revenue.

Yemeni security forces

A member of the Yemeni security forces frisks a man at a checkpoint in the former Al-Qaeda in the Arabian Peninsula (AQAP) jihadist’s bastion of Mukalla in Yemen’s coastal southern Hadramawt province, on November 30, 2018. PHOTO | SALEH Al-OBEIDI | AFP

But such are the fears of insolvency that many Yemenis are afraid of putting their money in local banks.

“Banks often say: ‘We don’t have money. Come tomorrow, come next week’,” said a 54-year-old school employee in Aden.

Businesses also criticise the central bank over cumbersome processes to obtain letters of credit for vital imports — in a country that depends almost entirely on food from abroad.

Lebanese protesters

Lebanese protesters during a demonstration outside the Saudi embassy in the capital Beirut on December 2, 2018 hold up pictures of children affected by the war in Yemen. PHOTO | ANWAR AMRO | AA | AFP)

In a letter sent in November to the prime minister and central bank chief, Aden’s chamber of commerce voiced concern that traders in areas outside government control were struggling to import essential goods. A central bank order requires payment in cash only.

The letter, seen by AFP, said the policy had caused a sharp decline in imports in those densely populated areas, making them prone to famine.

On the other side, businesses say the rebels are obstructing traders and banks in their areas from opening credit lines to Aden.

Yemeni Shiite Huthi rebels

Smoke billows following an air-strike by the Saudi-led coalition on a weapons depot controlled by Yemeni Shiite Huthi rebels on July 2, 2015 in the capital Sanaa. Yemen ahs been at war since 2014. PHOTO | MOHAMMED HUWAIS | AFP

Central bank chief Mohammed Zemam said this month five Sanaa-based central bank employees had fled to Aden over safety fears and were immediately blacklisted by the rebels.

“We are asking the rebels to leave the banking sector alone,” he said in a separate interview in Riyadh.

“This is the only way to feed the people.”