Yemen's Houthis Issue New Metal Currency Amid Concerns Over Deepening Banking Divides

The Ansar Allah (Houthi)-controlled Central Bank of Yemen issued today a new metal currency of 100 Yemeni riyals, a move aimed at replacing the damaged banknotes in Houthi-governed areas in North Yemen. 

At a press conference in Sanaa today, Hashim Ismael, the Houthi-appointed governor of the Central Bank in Sanaa, said, "The [new] currency is ready and has been coined according to international standards, and the process of offering the currency will not affect the exchange rates because it will only replace the damaged 100 riyal banknote."

He added that circulation of the 100 riyal coin will begin tomorrow, Sunday, and the Sanaa distribution points will be open around the clock to replace the damaged 100 riyal banknote.

Economic researchers said that the measures taken by the Houthis will harm the already deteriorating economic situation in Yemen and will even harm the currency exchange in the areas under the Houthi group's control.

They also said the new currency would contribute to deepening the financial division between the Central Banks of Aden and Sanaa.

Mustafa Nasr, the head of the Studies & Economic Media Center, said the Houthi move represents a new escalation towards further monetary division, fueling the conflict in the Yemeni banking sector.

He added, "As for the negative repercussions on the banking sector, it will depend on the decisions that will be taken by the Central Bank of Yemen in Aden, which Yemen's internationally recognized government controls, and the steps that international financial institutions and the global financial system can take.

He explained that the Houthi move will lead to a decline in the riyal's value against the US dollar because this move will open the appetite for issuing more coins to meet expenses. 

The Yemeni government warned against the Houthi move to print and distribute"illegitimate" currency. On Thursday, the Board of Directors of the Central Bank of Yemen in Aden held a meeting to discuss several economic and banking issues, including the Houthi intention to issue new banknotes or coins. 

The Central Bank warned all citizens, financial and banking institutions, and commercial sectors against dealing with or accepting the counterfeit currency, calling the Houthi group an "illegal entity". 

The bank said that it will exercise its legal right to take all measures to protect the national currency, citizens' savings, the banking system, and economic activity from the devastating effects of any irresponsible action.

Since 2020, the Houthis banned the circulation of the new banknotes printed by the central bank in Aden, leading to divergent currency values in Sanaa and Aden. 

In September 2016, then-President Abdo Rabbu Mansour Hadi ordered relocating the Central Bank of Yemen from Sanaa to Aden. The decision led to the creation of two central bank entities in Yemen. The one in Sana'a, affiliated with the Houthis, kept the physical infrastructure and information archives, while the CBY in Aden took international recognition with its associated privileges. The Houthis took over Yemen's capital in 2014 and toppled the Yemeni government in 2015.