Saudi Arabia pledges to deposit $1 billion in Yemen’s central bank to boost the country’s economy

Saudi Arabia has pledged to deposit $1 billion in Yemen’s central bank, which is based in the city of Aden, as the Yemeni government struggles with a weak currency and high fuel and commodity prices. The announcement of the deposit is expected to be made at the conclusion of a major humanitarian conference hosted by the King Salman Humanitarian Aid and Relief Center in Riyadh. The Saudi-led military coalition has been involved in a conflict in Yemen since 2015 against the Iran-aligned Houthi rebels, who ousted the Saudi-backed government from the capital, Sanaa.

The conflict has led to a no-war, no-peace stalemate, with both parties failing to renew a United Nations-brokered truce that expired in October. The situation has left millions of Yemenis in need of humanitarian aid, with around 80% of the population reliant on aid, and many struggling to find basic necessities such as food and water. The conflict has also had a severe impact on Yemen’s economy, with oil exports – a key revenue source – being hampered by Houthi attacks on terminals in the south.

The internationally recognized Yemeni government, which is based in the south, has seen its public finances deteriorate as a result of the conflict. To address this, in November, the Arab Monetary Fund signed a $1 billion agreement to support Yemen’s economic reform program. The Yemeni government has also resorted to money-printing to finance the deficit, while the exchange rate used to calculate customs duties on non-essential goods was raised by 50% last month amid dollar shortages.

Despite the support from the Arab Monetary Fund and other countries, the Yemeni government has continued to struggle financially. The Saudi pledge is therefore likely to be a welcome boost, though it is not yet clear whether it is part of an existing $3 billion support package pledged last May by Saudi Arabia and the United Arab Emirates for Yemen’s economy. The deposit will also help to address the issue of Yemen’s two rival central banks, as the Aden-based central bank is recognized by the international community, while the Houthi-controlled capital has its own central bank, which issues its own currency.

The deposit comes at a time when the Yemeni rial is trading at around 1,225 to the US dollar on the black market in Aden, highlighting the severity of the economic situation in the country. The deposit is expected to provide some relief for the Yemeni government and its citizens, who have been enduring the effects of the ongoing conflict for years.