By Faisal Abu Bakr | 2025-05-09

ADEN -- The Houthis' decision to incinerate old banknotes in circulation and replace them with a new 100-riyal coin they began to mint last year is accelerating Yemen's economic fragmentation, economists said.

The Houthis have removed the 50-riyal, 100-riyal and 200-riyal banknotes from circulation, al-Arabi al-Jadid reported in March, forcing Yemenis to use their new coin and operate within two separate financial systems, as if in two countries.

The Iran-backed group began to issue the 100-riyal coin through the Central Bank in Sanaa, which it controls, in March 2024, claiming the move was intended to address problems with worn banknotes.

But the government-affiliated Central Bank in Aden condemned the Houthi currency as counterfeit and illegal.

The monetary divide began in September 2016 when the Houthis rejected currency issued by the Central Bank after its relocation to Aden, economist Faris al-Najjar told Al-Fassel.

The group then enacted laws that crippled Yemen's banking sector, including a ban on "usurious transactions" that blocked banks from accessing 1.8 trillion riyals in local debt investments and reserves, triggering a liquidity crisis.

"The minting of coins further consecrates the financial divide, as the Houthis deliberately split the country with measures taken in the financial sector, turning a single system into two distinct financial systems," al-Najjar said.

There are now different currency exchange rates between government-controlled areas and Houthi-controlled territories, he said.

Banks remaining in Sanaa face both international sanctions and "Houthi looting and extortion," potentially reducing them to isolated currency exchange shops cut off from global banking, he explained.

Parallel economy

The Houthis have methodically constructed a parallel economy since seizing Sanaa during their coup of September 2014, Studies and Economic Media Center head Mustafa Nasr told Al-Fassel.

They have done this through a series of strategic moves, he said, including controlling oil derivative prices, cultivating affiliated traders, seizing opponent properties, and harassing businesses into submission.

"They have built a large financial empire, controlled by the group and affiliated parties, culminating in their takeover of the Chamber of Commerce and Industry in Sanaa," Nasr said.

The group has proceeded to manage the Chamber of Commerce and other economic institutions "in a manner that serves their interests," he said.

The Houthis' recent turn to minting coins came after they failed to print their own paper currency, he noted, but the effort has shown limited success due to its lack of legitimacy and legal standing.

Yemen's government has condemned the move as "an escalatory step," Nasr added, noting that currency issuance remains the exclusive right of the internationally recognized Central Bank in Aden.