Obsolete Currency: Black Market Flourishes in Liberated Provinces, Chaos Grips Sana'a Markets (Report) pen_spark

The Central Bank of Yemen's decision to replace old banknotes in Aden, the country's interim capital, has sparked widespread anxiety among Yemenis, who fear losing the value of their savings. This apprehension has driven citizens in liberated governorates to frantically sell their old currency, even resorting to black markets.

For days, markets in liberated governorates have witnessed a surge in citizens attempting to dispose of old denominations. This has fueled the emergence of a black market, as exchange companies and institutions have refused to purchase these currencies.

Banking sources in Taiz Governorate, southwest Yemen, revealed to Barran Press that the reluctance of exchange shops to accept old denominations has compelled citizens to sell them in gold markets, often at prices significantly lower than those offered in Sana'a and other Houthi-controlled areas.

These sources reported that 100,000 Yemeni riyals in old currency are currently exchanged for 666 Saudi riyals in Taiz, compared to 709 Saudi riyals in Sana'a.

The fear of devaluation has also created a rush to exchange old denominations for hard currency, particularly dollars and Saudi riyals. The demand for these currencies has intensified, leading to a decrease in their supply, particularly among gold merchants.

A gold store owner in Taiz confirmed to Barran Press that he had halted the purchase of old denominations due to a shortage of dollars and Saudi riyals. He attributed this shortage to the influx of old currency being sold, putting pressure on the purchase and replacement process. The exchange rate between the Yemeni riyal and the Saudi riyal has risen from 145 to 150 in recent days.

The gold store owner acknowledged that the current situation constitutes a black market, and even if the old currency reaches Sana'a, it will likely be bought on the black market there due to the volatile market conditions.

Banking sources also highlighted the same anxieties among citizens in Sana'a and other Houthi-controlled governorates. They attributed this to the Sana'a Bank's failure to address the situation effectively, despite giving a 60-day deadline for replacing old currency denominations.

The banking market in Sana'a is characterized by confusion and a lack of confidence in the decisions of the Sana'a Bank, which are perceived as reactive measures to the Central Bank's decisions in Aden.

Houthi Currency Swap Faces Challenges

The branch of the Central Bank of Yemen in Sana'a, controlled by the Houthi group, has announced plans to open currency exchange points in Taiz and Al-Bayda governorates to facilitate the replacement of old banknotes held by citizens in liberated areas. However, analysts warn that the initiative faces significant hurdles, raising doubts about its effectiveness.

Fares Al-Najjar, a strategic expert and analyst, expressed concerns about the feasibility of the Sana'a Bank's decision to compensate for old currency circulating in liberated governorates. He highlighted a lack of trust in the Houthi group's ability to manage the process fairly, fearing potential manipulation of citizens' funds.

"Issuing the decision to replace the old edition of the national currency from the illegal Central Bank in Sana'a may face a lack of confidence on the part of residents and investors," Al-Najjar stated in a Facebook post. He pointed out that the Houthi group has a history of controlling people's money under dubious pretenses, raising doubts about their commitment to transparent procedures.

Al-Najjar further argued that the amount of old currency held in liberated areas is relatively small, making the potential hardship and travel to Houthi-controlled areas for exchange unnecessary. He also emphasized the Houthi group's severe financial constraints, questioning their ability to provide sufficient new currency to replace the old.

This lack of resources, he argued, highlights the group's inability to implement balanced economic policies.

The decision to replace old currency stems from a May 30th announcement by the Central Bank of Aden, which called on individuals, businesses, and financial institutions to deposit old banknotes issued before 2016 within 60 days. The Central Bank of Aden emphasized the importance of prompt action to protect citizens' funds and serve the public interest, stating that it would not be responsible for any losses incurred due to delayed or non-compliance with the announcement.