Yemen: power-sharing agreement gives rise to hopes of economic recovery

Analysts in Aden hope new government can build on riyal's gains

Security forces loyal to the separatist Southern Transitional Council stand next to vehicles as they are deployed in the southern port city of Aden, Yemen. Reuters

The Yemeni riyal has rallied following the formation of the new government on Friday.

On Sunday, one US dollar was worth 765 Yemeni riyals, having peaked at 890 riyals last week. One Saudi riyal was traded at YR202 in Aden on Sunday, after peaking at YR240 last week, the Al Salami currency exchange in Aden told The National.

Economists in Aden say the sudden recovery is likely to be temporary.

"The slight recovery in the value of the local currency will not last long because it wasn't the result of economic growth or enduring economic solutions," Majid Al Daeri, an economic analyst based in Aden, told The National.

"But the new government can build on this momentum through a large-scale reconstruction programme, focused on reviving the dire economy in the war-torn country. Such a reconstruction program must be financially backed by the Arab Coalition, along with reviving local oil exports."

However, the currency's gains created a glimmer of hope for people in liberated areas.

Residents in Aden told The National they were optimistic that restored economic confidence following the implementation of the Riyadh Agreement would help them.

The Yemeni riyal's prior devaluation caused sharp hikes in prices of essential items, including food.

"I am extremely optimistic about the formation of the new government. They'll be responsible for finding quick solutions to the economic crisis, especially saving the value of our local currency," said Mohammed Ali, 70, from the Crater district in Aden.

"I wish the recovery will continue and the price of food will go down, because life has been miserable in the last couple of years.

“The new government must get back soon to operating from Aden. The economic crisis won’t be solved unless the state institutions operate well."

There is a popular perception that traders have been intentionally hiking prices, despite widespread hardship.

"People need the government to monitor the price of basic necessities in the market, because merchants have been wreaking havoc in the city. Every shopkeeper sets the price to what he wants," Mr Ali said.

Ali Al Absi, 52, from Taez, said: "The formation of the new government gave us a little hope because the new government is representing all the political factions, which means all of them are responsible for finding a quick response to the deteriorating situation, especially the economy.

"We are tired of war. We must compromise and work collaboratively to save the lives of the people who are on the brink of famine."

The prices of everyday necessities dropped slightly in the local markets on Sunday.

In Aden, a sack of flour which had cost YR19,000, about $28, was selling for YR18,000, or around $26.

A sack of sugar, which cost YR19,000 YR last week, was reduced to YR17,000 YR on Sunday, around $22 in the local rate, a drop of around $6. Despite this, most food merchants kept prices at the same level as the previous week.