Yemen government calls on World Bank, IMF to end Houthi banknote ban

Yemeni bank tellers count money at the central bank in government controlled Aden. Houthis have recently banned traders from using central bank banknotes in the areas under the militia's control. (AFP/File Photo)
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Updated 02 January 2020

Yemen government calls on World Bank, IMF to end Houthi banknote ban

  • Houthi ban has caused nation-wide economical repercussions including the fall of the currency
  • Houthis have recently banned local traders from trading with banknotes that were recently printed by the central bank in Aden

AL-MUKALLA, Yemen: The internationally recognized government of Yemen has sent letters to the World Bank and the International Monetary Fund, urging them to pressure the Iran-backed Houthis to revoke their ban on the recently-printed banknotes. 

The government said that Houthis ban has caused nation-wide economical repercussions including the fall of the currency and the stop of salaries.

“We have told them that Houthi decision would have destructive impact on the national currency," a senior government official told Arab News on condition of anonymity because he was not authorized to speak to the press, adding that the government turned to the international monetary funds after running out of options to stop Houthis.

“We have no authority over them. The only thing we can do is raising the issue to the international community,” the official said.

Houthis have recently banned local traders from trading with banknotes that were recently printed by the central bank in Aden. People under Houthi-controlled areas were given a month to swap their notes with the old ones or replace them with Houthi- initiated electronic riyal.

The Yemeni government said that Houthis, who facing multiple battlefields, aimed to absorb cash from the market to fund their military efforts and other activities.

“Their aim is socking up liquidity from the market and divert it to their military activities. This is a dangerous decision that would leave bad mark on everyone including those who live in liberated areas,” the government official said.

Not trusting Houthi procedures, traders said they sent their cash to government-controlled areas such as Marib city, where they replaced their new notes with the old one.

If Houthis-controlled continued confiscating the currency, the Yemeni official warned, the government might be forced into printing more money or a face cash crunch. “We do not want to restore to this option as it would cause inflation,” the official said.

On Wednesday, Yemeni riyal continued to plunge, hovering around 610 to the dollar in the port city of Aden after falling from 602 over the weekend. Finance ministry in Aden said on Tuesday that Houthi ban has obstructed paying public servants in Houthi-controlled areas as local banks refused to disperse salaries due to lack of cash.

In a statement broadcast on the national TV, the ministry held Houthis responsible for disrupting salaries, saying 175,000 government employees would not be able to receive salaries and it would resume paying salaries when rebels revoke the decision.  

Similarly, the central bank in Aden warned local companies from complying with Houthi ban or electronic riyal, saying recent regulations by the branch of the central bank in Sana’a are illegal, vowing to take action against local companies that deal with Houthi electronic riyal.  In Sana’a, Houthis issued a statement warning traders against complying with calls for civil disobedience in their territories, saying shops and companies that shut down operations on Wednesday were doing their annual count.

Politically, analysts in Yemen think Houthis initiated the ban on the recently printed notes to show they are still politically and economically powerful and can made trouble to the government in Aden.

“This comes in the context of their attempt to show they are in control of the economy and have a say on the central bank decisions,” Yasser Al Yafae, a political analyst based in Aden told Arab News on Wednesday.

“They escalated military activities and imposed a ban on the new banknotes to demonstrate they have not been weakened by fighting or economical decisions such as relocation of the central bank to Aden.”

 


IMF: Low rates and reduced trade tension to aid world growth

Updated 6 min 29 sec ago

IMF: Low rates and reduced trade tension to aid world growth

  • International economy is receiving significant boost — 0.5 percentage point of growth last year and this year
  • But IMF warns global economy continues to face array of risks

WASHINGTON: Low interest rates and reduced trade tensions will likely buoy the global economy over the next two years and help nurture steady if modest growth.
That’s the view of the International Monetary Fund, which foresees world economic growth accelerating from 2.9% last year to 3.3% in 2020 and 3.4% in 2021. The international economy is receiving a significant boost — 0.5 percentage point of growth last year and this year — from central banks’ low-rate policies, the lending organization says in a global outlook report out Monday. The US Federal Reserve, for instance, cut rates three times last year and expects to keep rates low for the foreseeable future.
And an interim trade deal signed last week by the United States and China — the world’s two biggest economies — is expected to add 0.2 percentage point to global growth this year by lowering tariffs and improving business confidence. The global economy is rebounding from some temporary stumbles, including a lull in the launch of new technology products and new emissions standards that disrupted car production.

Still, the IMF warns that the global economy continues to face an array of risks, including the possibility that trade tensions will escalate again. And many countries aren’t benefiting from the modest upswing in growth.
Presenting the report at a news conference in Davos, Switzerland, IMF chief Kristalina Georgieva said that after a slowdown in 2019 there should be “a moderate pickup in global growth this year and next.”
“We already see some tentative signs of stabilization,” she said. “But we have not reached a turning point yet.”
Even in the United States, the IMF foresees growth slowing from 2.3% in 2019 to 2% this year and 1.7% in 2021, partly because the boost that the economy received from President Donald Trump’s 2017 tax cuts has been fading.

China’s economy will also continue to decelerate, the IMF predicts — from 6.1% last year to 6% in 2020 and 5.8% next year. Though China’s economy will likely benefit from the truce with the United States, Beijing continues to manage a difficult transition away from speedy economic growth based on often-wasteful and debt-fueled investments to slower but steadier growth built on spending by the country’s growing middle class.
Likewise, Japan’s economic growth, hobbled by an aging workforce, is expected to decelerate from 1% last year to 0.7% this year to 0.5% next year.
Collective growth in the 19 countries that use the euro currency is expected to gradually pick up: 1.2% in 2019, 1.3% in 2020 and 1.4% in 2021.
The IMF’s global forecast is slightly bleaker than the previous one it issued in October, mainly because of an expected sharp slowdown in India: The world’s seventh-biggest economy is expected to grow 5.8% this year, down from the 7% the IMF had expected in October, and 6.5% in 2021, down from a previously forecast 7.4%. In addition, problems in the financial sector have reduced credit, crimping consumer spending in India.