According to state-run SPA news agency, Saudi Arabia has agreed to deposit $1 billion in Yemen’s central bank, which is situated in Aden. The move is intended to stimulate the war-torn nation’s economy.
The declaration was made on Tuesday, as the Saudi-backed government struggles with a depreciating currency and high prices for commodities and petrol following nearly nine years of conflict.
Months after the internationally recognised government was deposed by Houthi rebels, who now rule Sanaa, the capital, and a sizable portion of the country’s north, Riyadh engaged militarily.
It was unclear right away whether the $1 billion was a portion of the $3 billion in economic support that Saudi Arabia and the United Arab Emirates promised Yemen in May.
After the Houthis launched a series of raids on facilities there late last year that hindered oil shipments, a crucial source of income, the internationally recognised government situated in the south saw its public finances deteriorate.
The Arab Monetary Fund, situated in the capital of the United Arab Emirates, Abu Dhabi, struck a $1 billion agreement to help Yemen’s economic reform initiative in November.
Due to a shortage of dollars, the administration in Aden increased the US dollar exchange rate used to determine customs charges on non-essential commodities by 50% last month, causing prices to reach record highs.
According to traders, the rial was trading at a rate of 1,225 to the US dollar on Tuesday.
It has two competing central banks. To pay the deficit, the government has turned to money creation, but in Houthi-held areas, where new notes are prohibited, the exchange rate is closer to 600 rials to the dollar.
Since the Houthi rebels, who are tied to Iran, overthrew President Abd-Rabbu Mansour Hadi’s administration in 2014, Yemen, the most impoverished nation on the Arabian Peninsula, has been in ruins.
Since then, conflict between the Houthis and a pro-government force supported by a Saudi-led military coalition has claimed thousands of lives, left 80% of the population dependent on aid, and left millions of people hungry.
A two-month ceasefire backed by the UN was reached in April 2022 by Houthi rebels and the internationally recognised Yemeni government stationed in Aden.
The combat has virtually halted, but neither side has managed to extend any of the earlier UN-brokered cease-fires that came to an end in October.
In January, the foreign minister of Saudi Arabia stated that although the battle was coming to a conclusion, more needed to be done, including moving towards a long-term truce.