Paper Money

Islamic extremist group bans current notes in occupied Yemen

Normally and logically, when new bank notes are issued, the older ones of the same denomination are removed from circulation, and in most instances, demonetized

The Houtis, an Iranian-backed Islamic extremist group who control the northern part of Yemen in a five-year conflict with the Saudi-backed internationally recognized Yemeni government in Aden, have it backwards. People are standing in line to exchange their crisp new notes for decrepit old ones.

Reuters reported last month that the Houtis, based in Sanaa, outlawed the use and possession of new Yemeni riyals issued by its foes in Aden, and ordered people to use only old notes. The Houtis say the move is meant to combat inflation caused by the Yemenis printing too much money. Aden is calling it an act of economic vandalism.

The populace are victims stuck in the middle. Those in the north can use only notes printed before 2017. These are scarce and often in rotten condition, yet they are trading at a premium over new ones. For actual paper currency, unofficial exchanges in Sanaa are offering to change 100,000 riyals of new notes into 90,000 to 96,000 riyals of the old ones. For electronic currency, legal exchanges will turn 100,000 new Yemeni riyals ($172) into electronic currency for a fee of about $1.50. 

Before the ban was announced in December, the riyal was about 560 to the dollar. It has declined a bit in Houti areas to around 582, but dipped more in the south, to 642, where more currency is available. Although this may seem good for northerners, they cannot get enough of the old notes to support the mostly cash-based economy. 

Reuters quoted a worker in Sanaa lamenting “We go for the exchange and they won’t take [the new notes] from us. Or say they need three, four or five days. … The new one isn’t accepted and the old one is worn out, they have to find a solution.” 

Another interviewee said, “When people saw that new currency come into circulation, they held onto it as it was new and shiny. But now it’s a problem that they have it.” 

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