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Yemen’s Central Bank moves to Aden. So what’s next?

September 24, 2016 at 9:00 am

Just months after the 21 September 2014 coup, Houthi militias stormed the Central Bank of Yemen along with other government institutions and Yemen’s largest national newspaper, Al Thawra, in order to establish as much institutional control of Yemen as possible. President Abd Rabbuh Mansur Hadi was later placed under house arrest on 22 January 2015, only to escape to Aden a month later before relocating to Saudi Arabia after the airstrikes began.

The current Yemeni government under Hadi has been very disconnected from the capital city Sana’a since the start of the coup. It is often forgotten that at the beginning of August last year, the then-governor of Aden, Nayef Al Bakri, announced that Aden was to become the capital city of Yemen for the next five years. This decision was welcomed for many reasons that range from the political to the economic, but it also signalled that the Yemeni government was losing hope of regaining Sana’a in the near future. Such sentiments can only be seen as being amplified following the government’s latest move of transferring the country’s central bank to Aden.

Militarily speaking, the Houthis and former Yemeni dictator Ali Abdullah Saleh have the upper hand in Sana’a. They have complete control of governmental institutions and local resistance forces have not been making advances against the Houthi and Saleh militias. It is also clear that the Saudi-led coalition airstrikes are not helping to clear Sana’a of militia forces. Currently, whatever is in Sana’a is subject to being coerced, threatened or swayed by the Houthis and Saleh, including the Central Bank.

The bank is seen as the last hope for some form of stability in Yemen with the political and security situation spiralling out of control. Exports have decreased dramatically and the government is finding it increasingly difficult to pay for imports. The fact that there is $5 billion missing from the bank means that the country’s economic security is at high risk.

In Sana’a, the Houthis and Saleh have been using the Central Bank to fund their war expenses. In August, the president of the Houthi revolutionary committee announced a pledge of 1 billion Yemeni riyals (just under $4 million) to restore Saleh’s Republican Guard. The Houthis have also recently stolen $1.2 million of public funds to start a radio station after they broke into the Central Bank’s headquarters. This is despite the fact that, in May, the Central Bank stated that it will allow for $100 million a month to finance the Houthi-Saleh side to the war.

Politically speaking, Mohamed bin Hammam, the former governor of the Central Bank was seen as an ally to the Houthis. In August, the Hadi government openly announced its mistrust toward the former governor, accusing him of turning a blind eye to the Houthi and Saleh induced corruption in the bank. Houthi spokesman Mohamed Abdel Salam slammed the government’s decision to dismiss Hammam, along with the decision to relocate the bank earlier this week, perpetuating sentiments of the bank being subjected to Houthi and Saleh corruption if it remained in Sana’a. This is making it harder for aid to get to the Yemeni people and even making creditors and donors reluctant to pay sums of money into the bank.

Having the Central Bank situated in the temporary capital means there will be a significant amount of autonomy for Aden. The Adeni authorities will most likely receive a priority for financing and pay, including civil servants many of whom have not yet received their salaries.

It will also affect the separatism debate. On the one hand, taking the Central Bank out of Sana’a could calm separatist views, as one of the main grievances for southerners was that the Yemeni government was centralised in Sana’a under Saleh who purposely marginalised southerners. On the other hand, the bank’s move could also mean separatist perceptions could be heightened as it poses an opportunity for southern Yemen to institutionally prepare itself for autonomy. This is something only southern Yemenis can decide for themselves at some time in the future.

The Central Bank is the last lifeline for Yemen. With war and famine widespread across the country, the faltering of economic security could be catastrophic. Though the move of relocating the Central Bank is overdue and ideally should have been done in September 2014 after the Houthi coup, it is one of the only ways to ensure money does not continue to pour itself into the militia forces. Now, the country faces the challenging process of relocating the bank and preventing any further corruption and damage from occurring to the economy.

The views expressed in this article belong to the author and do not necessarily reflect the editorial policy of Middle East Monitor.