Saudi Arabia announced on Wednesday it would transfer $2 billion to Yemen’s central bank, following desperate calls for a financial rescue from the beleaguered government it has supported militarily for nearly three years.
The bailout aims to curb the fall in value of the Yemeni riyal, which has plummeted as the war between the Saudi-backed government and Huthi Shiite rebels who control the capital Sanaa and much of the north has dragged on.
“To address the deteriorating economic situation faced by the Yemeni people as a result of the actions of the Iranian-backed Huthi militias, King Salman bin Abdulaziz has issued a directive to transfer a $2 billion deposit to the central bank of Yemen,” the Saudi interior ministry said.
The riyal currently trades at 500 to the dollar, down from around 215 before the war, a serious depreciation for a country that relies heavily on imports of basic foodstuffs.
In 2016, the Yemeni government moved the central bank to second city Aden from the capital where the rebels operate their own rival central bank.
More than one million civil servants lost their jobs in the bank transfer, and both the Sanaa and Aden central banks have struggled to pay salaries.
Saudi Arabia, which itself faces a hefty budget deficit, has led a military coalition in support of the government since March 2015.
But as the intervention nears its fourth year, the government’s authority is still largely confined to the south.
The conflict has left more than three-quarters of Yemenis in need of humanitarian aid and some 8.4 million at risk of famine, the UN humanitarian affairs office said on Tuesday
In a post on Facebook, Prime Minister Ahmed bin Dagher shared a letter urging the government’s backers to transfer cash to the central bank to “save Yemenis from famine”.
President Abedrabbo Mansour Hadi reached out to Saudi Crown Prince Mohammed bin Salman over “the economic challenges Yemen faces” in a telephone call on Tuesday, Yemen’s government-run Saba news agency said.
Saudi Arabia, the world’s largest exporter of oil, has posted large budget deficits in the past four fiscal years as a 2014 slide in crude prices has hit revenues.
Despite introducing new taxes and cutting spending, the kingdom does not expect to balance its books before 2023.