The internationally recognized government of Yemen has sent letters to the World Bank and the International Monetary Fund, urging them to pressure the Iran-backed Houthis to revoke their ban on the recently-printed banknotes. 

The government said that Houthis ban has caused nation-wide economical repercussions including the fall of the currency and the stop of salaries.

“We have told them that Houthi decision would have destructive impact on the national currency," a senior government official told Arab News on condition of anonymity because he was not authorized to speak to the press, adding that the government turned to the international monetary funds after running out of options to stop Houthis.

“We have no authority over them. The only thing we can do is raising the issue to the international community,” the official said.

Houthis have recently banned local traders from trading with banknotes that were recently printed by the central bank in Aden. People under Houthi-controlled areas were given a month to swap their notes with the old ones or replace them with Houthi- initiated electronic riyal.

The Yemeni government said that Houthis, who facing multiple battlefields, aimed to absorb cash from the market to fund their military efforts and other activities.

“Their aim is socking up liquidity from the market and divert it to their military activities. This is a dangerous decision that would leave bad mark on everyone including those who live in liberated areas,” the government official said.

Not trusting Houthi procedures, traders said they sent their cash to government-controlled areas such as Marib city, where they replaced their new notes with the old one.

If Houthis-controlled continued confiscating the currency, the Yemeni official warned, the government might be forced into printing more money or a face cash crunch. “We do not want to restore to this option as it would cause inflation,” the official said.

On Wednesday, Yemeni riyal continued to plunge, hovering around 610 to the dollar in the port city of Aden after falling from 602 over the weekend. Finance ministry in Aden said on Tuesday that Houthi ban has obstructed paying public servants in Houthi-controlled areas as local banks refused to disperse salaries due to lack of cash.

In a statement broadcast on the national TV, the ministry held Houthis responsible for disrupting salaries, saying 175,000 government employees would not be able to receive salaries and it would resume paying salaries when rebels revoke the decision.  

Similarly, the central bank in Aden warned local companies from complying with Houthi ban or electronic riyal, saying recent regulations by the branch of the central bank in Sana’a are illegal, vowing to take action against local companies that deal with Houthi electronic riyal.  In Sana’a, Houthis issued a statement warning traders against complying with calls for civil disobedience in their territories, saying shops and companies that shut down operations on Wednesday were doing their annual count.

Politically, analysts in Yemen think Houthis initiated the ban on the recently printed notes to show they are still politically and economically powerful and can made trouble to the government in Aden.

“This comes in the context of their attempt to show they are in control of the economy and have a say on the central bank decisions,” Yasser Al Yafae, a political analyst based in Aden told Arab News on Wednesday.

“They escalated military activities and imposed a ban on the new banknotes to demonstrate they have not been weakened by fighting or economical decisions such as relocation of the central bank to Aden.”