Mukalla, Yemen –

The Yemeni government’s recent attempts to stabilize the devaluing Yemeni riyal have had some success, but they’ve also led to a significant liquidity crisis.

The central bank, based in Aden, has closed down unlicensed currency exchange firms that were accused of speculation. They’ve also set up a committee aimed at centralizing domestic remittances and managing imports while supplying traders with hard currency.

Initially, these actions were seen as positive, halting the riyal’s plunge from around 2,900 riyals per US dollar a few months ago to approximately 1,500 now. Yet, this improvement was short-lived as frustration over the riyal’s severe cash shortage intensified.

Residents in government-controlled areas like Aden, Taiz, and Mukalla report an unprecedented lack of Yemeni riyals in circulation. Many, especially those with US dollars and Saudi riyals, find that local banks and currency exchanges are either unwilling to exchange foreign currencies or restrict transactions to just 50 Saudi riyals daily, citing a cash shortage.

This situation has made it difficult for many Yemenis to access funds or withdraw their savings in foreign currency, putting immense pressure on businesses and driving many to engage in a black market with unfavorable foreign exchange rates for consumers.

Business is Brought to a Halt

Mohamed Omer, who manages a small grocery store in Mukalla, shared his struggles as he spends hours visiting various exchange offices, hoping to convert hundreds of Saudi riyals from customers. “I went from one to another, but they only allow me to exchange 50 riyals,” said Omer, a middle-aged man with a salt-and-pepper beard. “It’s just a waste of my time. I think I’ll have to close my shop.”

For over a decade, Yemen has grappled with an economic collapse due to the conflict between the Saudi-backed government and Iran-aligned Houthis, resulting in countless casualties and displacements.

In addition to battlefield clashes, both sides are targeting each other’s primary income sources, leaving both the Houthis and the government struggling to pay civil servants and maintain basic services.

During its latest board meeting, Aden’s central bank acknowledged the ongoing cash crisis, approving a series of unclear “short-term and long-term” strategies to tackle the issue. They noted they were following “conservative precautionary policies” aimed at stabilizing the riyal and reducing inflationary pressures.

Government employees have also expressed frustration with their salaries, which are disbursed in low-denomination notes, primarily 100 riyals. This often means they have to carry their pay in bags.

Munif Ali, a civil servant from Lahij, vented his frustrations on social media, sharing a video of himself sitting next to a tightly packed bundle of 100 and 200 riyal notes he received from the central bank. “Traders are refusing to take these,” he remarked, gesturing at the notes. “Some kind of action has to be taken against them.”

Those who save in Saudi riyals, Yemenis living abroad sending money home, and soldiers paid in Saudi riyals are some of the most affected by this cash shortage.

Finding Workarounds

To navigate this shortage and the unwillingness of exchange firms to trade foreign currency, Yemenis have found creative solutions. Some manage to negotiate delayed payments with trusted shopkeepers, while others turn to local grocery stores for currency exchanges, albeit at less favorable rates. Banks and exchanges have started facilitating online transfers, offering a bit of relief for some.

The situation is significantly harsher in rural regions, where internet access is scarce and exchange offices are few and far between.

Saleh Omer, from Hadramaut’s Dawang district, shared his experience of receiving a remittance of 1,300 Saudi riyals from abroad. He found that the exchange company wouldn’t convert it to Yemeni riyals due to cash shortages and suggested he visit a local shop instead.

Although the official exchange rate was around 410 riyals to the Saudi riyal, after several attempts, the shopkeeper reluctantly agreed to exchange just 500 riyals at a lower rate of 400. “I was almost begging him,” Saleh said, adding that he would need to make more trips to other shops to convert the remaining amount. “Exchanging Saudi riyals for Yemeni riyals is no small feat.”

Connections Matter

People who have strong connections generally find it easier to cope with cash shortages. Some rely on personal contacts at banks and exchange companies to ensure they can access cash. Khalid Omer, a travel agency owner in Mukalla, mentioned that most business transactions are done in Saudi riyals or US dollars, but when Yemeni riyals are needed to pay employees or bills, turning to trusted exchange contacts becomes essential. “Exchange companies are saying they also have liquidity issues,” he noted.

On social media, many Yemeni individuals have reported that patients are being denied medication because medical facilities refuse payment in Saudi riyals and exchange companies decline to convert it to Yemeni riyals.

Hesham Al Samaan from Taiz explained his frustrating experience as he looked for someone to exchange his money for medical treatment after local hospitals wouldn’t accept Saudi riyals. “Is there any justice for us? Who will hold accountable those who refuse to exchange currency and take advantage of us?” he lamented in a Facebook post, which received numerous likes and comments from others facing similar medical service barriers.

The cash crisis also turned into an unexpected advantage for traders importing from Saudi Arabia, as the Saudi riyal became available at discounted rates. A clothing merchant in Mukalla remarked that he accepts payments in both Yemeni and Saudi riyals to attract customers and ensure he has enough foreign currency for his business. “As a seller dealing primarily in Yemeni riyals, I’m actually gaining from this cash shortage,” he stated on the condition of anonymity. “It’s beneficial for me because exchange companies looking for local currency can trade me Saudi riyals at better rates.”