The Coup Effect on Economy, Poverty and Starvation in Yemen (2)

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*The Studies Center and Economic Media
*Translated by: Mr. Ameen Aljaradi

The War Support is a Means of Collecting Funds for the Huthis
The term “War Support” is known in the Yemeni circles, especially
those interested in the economic and financial affairs. It means that
the Houthi militia collects funds for its benefit and finances its war
against the legitimate government.
The amount of 25 billion riyals per month through the Ministry of
Defense is delivered as salaries to the military sector under the
supervision of representatives of the group in the camps.
And if the amount was calculated during the period of control from
February 2015 until the end of May 2017, the total amount acquired by
700 Billion R.Y, of which 168 billion riyals go salary taxes and the
rest 532 billion riyals go to the war effort (Source: the statement of
the former Central Bank of Muhammad bin Hammam.

The Houthis – the Acquisition of Salaries under – cover -the War Support
The many methods invented by the Houthis to raise funds for what they
called (war support), in addition to what is taken from the state
budget and its institutions and most prominent means to impose
royalties: collect donations from merchants and shops.

The most prominent campaigns in this regard call for contributions
launched by the leader of the group Abdul-Malik al-Houthi to donate to
the Central Bank by citizens; Hundreds of thousands of loyalists of
the group or afraid of their oppression to donate, but no supply of
coffee or to announce the final figures of such amounts and their
disbursements.
Imposing money on shops, some ranging between 15-20% under multiple
names and most go to the war support. Acquisition of deductions from
salaries of civil servants and military personnel. To cut the salaries
of civil servants opposed to the group or fleeing their oppression and
supplying their salaries to the group.

The multiplication of the special accounts of the government
institutions that are contrary to the law, and the disbursement of
these accounts without supervision or audit of that expenditure.
The appointment of a number of Houthi supervisors in ministries and
government security and military institutions, numbering nearly three
thousand supervisors, who control the decisions of those institutions,
including the Ministries of Defense, Interior, Higher Education, and
others.

Inflation and the Collapse of the Currency Rate

The prices of goods and services in Yemen witnessed a frightening
escalation during the years of the coup (2015-2016). On average, it
reached 39%, which increased the living conditions of large segment of
Yemeni citizens who were victims of this high price.

The group engaged in trading oil derivatives, relief materials, tax
collection and customs, and allocates a large part to the war effort.
The Yemen Economic Indicators Report issued by the Center for Studies
and Economic Information in Yemen indicates that the prices of basic
materials increased by 22% during the last year 2016.
According to information provided by the World Food Program, prices of
many commodities have stabilized relatively in the last few months of
2016, affected by the liquidity crisis and the consequent sharp
contraction in aggregate demand.

However, the cost of the minimum food basket remained 24.1% higher on
average in October 2016 than before the war. Oil, diesel and cooking
gas prices were up 23%, 26%, and 72% in October 2016 compared with the
prewar period.
The exchange rate of the local currency is one of the most important
economic indicators because it is directly reflected in the prices of
goods and services and the purchasing power of the national currency,
especially in Yemen where the degree of economic exposure abroad is
68%.
The Yemeni currency exchange rate of the Yemeni riyal during the
period 2015-2016 is 42%; it means that Yemeni savings in Yemeni riyals
eroded during the two years by the same percentage. A 1% increase in
the exchange rate would increase inflation by 20.33%, according to the
International Monetary Fund.

Inflation is expected to rise to 55% in 2017 due to a series of
practices that led to the collapse of the riyal.
The increase in the level of inflation, most notably the withdrawal
of hard currency from the market and trading in the import of oil
derivatives; Al-Houthi group, estimated to generate revenues of up to
$ 1.5 billion annually.
Not only has the hard currency been withdrawn; a trillion and 200
billion riyals have been hidden by the central bank into the banking
market during the seven months of 2016.

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