The Houthis’ Currency Is Deepening Yemen’s Monetary Divide, Fueling the Shadow Economy

The decision by Yemen’s Houthi movement to issue new currency in areas under its control has raised fresh concerns about the country’s already devastated economy. 

It also prompted questions about how the internationally recognized government will respond to what some have called a catastrophic move.

On July 16, 2025, the Houthis announced the release of a new 200-riyal banknote, worth roughly 83 cents, for circulation. 

This followed the minting of a new 50-riyal coin, valued at approximately 20 cents, just three days earlier. Both developments were confirmed in a statement by the Houthi-run central bank in Sana'a.

A Breach of the Agreement

In response to the announcement, Yemen’s internationally recognized government issued a statement on July 16 rejecting the Houthi decision and describing it as “a continuation of the economic war waged by the militia against the Yemeni people.”

In a statement released by the Central Bank in the interim capital, Aden, the government condemned the move as “a reckless and destructive act that targets the livelihoods of Yemenis and worsens the country’s catastrophic economic situation.”

The government also warned that the Houthis’ “dangerous escalation undermines the July 23, 2024, declaration issued by the UN envoy, which was backed by both regional and international sponsors.”

Nearly a year ago, the United Nations envoy to Yemen, Hans Grundberg, announced that the Yemeni government and the Houthi movement had reached an agreement on “a series of de-escalation measures related to the banking sector,” following a period of tit-for-tat actions between the two sides.

The UN-brokered agreement, signed in late July 2024, stipulated that both parties would “cancel all decisions and measures taken against banks” and refrain from issuing any similar decisions or actions in the future.

At the time, the Houthis announced the minting of a 100-riyal coin for the first time. In response, the Yemeni government’s central bank moved to revoke the licenses of six of the country’s largest commercial banks, all headquartered in the Houthi-controlled capital, Sana'a.

Despite the backlash, the Houthi authorities defended their decision, calling it a “well-considered and responsible measure” intended to replace damaged banknotes of the same denomination.

In a statement issued by the central bank in Sana'a on July 15, 2025, the group said the move was part of an effort to “address the problem of worn-out currency and improve the quality of cash in circulation.” 

The statement also claimed that the new issuance “would not increase the money supply or affect exchange rates.”

In contrast, UN envoy Hans Grundberg said in a statement on July 17, 2025, that the move was unilateral and undermined efforts to build trust at a time when hopes for progress on the economic track are rapidly fading.

Echoing similar concerns, the ambassadors of the European Union, France, the Netherlands, and Germany stressed on July 15, 2025, that the Central Bank in Aden is the only institution authorized to issue legal currency for the Republic of Yemen. 

They described any alternative attempts to mint money as illegal counterfeiting.

The remarks came during a meeting between the EU delegation, led by Ambassador Gabriel Vinals—and Central Bank Governor Ahmed Ghaleb al-Mabaqi in the interim capital, Aden, according to a brief statement shared by the EU mission on its official account on X.

A Multifaceted Disaster

Commenting on the implications of the Houthi currency issuance, Mohammed Qahtan, an economics professor at the University of Taiz, said the fragmentation of the central bank, the collapse of the banking system in Houthi-held areas, and the ongoing depreciation of the national currency have severely eroded public trust in financial institutions.

“The division of the central bank, the deteriorating national currency, and the collapse of the banking sector in Houthi-controlled regions have all contributed to the public’s loss of confidence in banks,” Qahtan told Yemen Daily News in remarks published on July 21, 2025.

He added that many citizens have resorted to safeguarding their savings by turning to foreign currencies, particularly the Saudi riyal and the U.S. dollar, as more stable alternatives. Others, he noted, have increasingly looked to gold and real estate as safe-haven assets.

According to the economics professor, the Houthis’ move to print new currency without any monetary backing and by an authority that is not internationally recognized constitutes a compounded economic disaster. 

He warned that it poses a direct threat to citizens’ savings, deepens the country’s monetary division, fuels the shadow economy, and risks the complete collapse of what remains of Yemen’s banking system.

Meanwhile, Yemeni political analyst Hassan Mughlis described the move as unsurprising. “This step is not unusual for the Houthis, and any decision can be expected from them. Issuing currency is not their first such move,” he said.

Mughlis added in comments reported by Yemen’s Belqees TV on July 16, 2025, that the Houthis have created a parallel economy and have tried to maintain it as much as possible, aided by the United Nations, which he accused of giving the militia this opportunity.

The Yemeni analyst stressed that “currency must have banking value. Do these notes printed by the Houthi militia have any banking value or legal backing? Of course not.”

Mughlis raised a series of questions, asking, “Would an ordinary Yemeni holding 100 dollars go to exchange it for these notes? Would the teller accept them? And do people have any confidence in them?”

“A banknote is fundamentally a document of trust between the citizen and the bank. Here, that trust is missing. On what basis, then, is this currency being printed?” he added.

“The Houthis’ actions were predictable, driven by the absence of a functioning state. The internationally recognized government itself has been lax, and the country’s political structure has allowed the Houthis to extend their influence unchecked, as there are no firm or deterrent measures against them.”

Mughlis also accused the United Nations of being lenient toward the Houthis, saying it “consistently prioritizes humanitarian concerns while neglecting the country’s economic stability. Yemen has suffered economically as a direct result of these policies.”

Indonesian Printing Presses

In a related development, Yemeni economic expert Majid al-Daari wrote on his Facebook account on July 17, 2025, that the Houthis lost hundreds of billions in various foreign currencies when secret weapons warehouses containing the funds were destroyed in U.S. airstrikes.

Al-Daari explained that more than one billion dollars had been targeted by Israeli strikes on warehouses belonging to the al-Qard al-Hasan Association, affiliated with Hezbollah. 

The association had been investing the funds on behalf of the Houthis in Lebanon prior to the Lebanese central bank’s decision to ban all banks and financial institutions from dealing with the group permanently.

“The exposure of the financial portfolios belonging to Houthi networks, estimated at around 7 trillion rials (with the US dollar valued at 240 rials), has forced the group, which once controlled one of the largest financial empires in the region, to resort to minting and printing counterfeit currency and forcibly injecting it into areas under its control,” he added.

Al-Daari argued that the Houthis are attempting through this move to “offset some of their losses and avoid economic collapse, as they struggle even to pay the salaries of their employees and fighters by the end of the year.”

In another post, the Yemeni expert warned of the “danger posed to the global banking sector if a militia classified as terrorist were to possess banknotes and currency printing presses, assuming such printing takes place in Yemen.”

“This would give them the capability to produce counterfeit currency for any country and flood the banking markets in their territories with fake local and foreign money by force of their de facto authority. This would effectively sabotage the banking sector through the introduction of forged currencies and facilitate various financial crimes, including money laundering, concealment, and smuggling,” al-Daari said.

Yemen’s Aden News agency reported on July 19, 2025, that the Houthi movement successfully printed large quantities of 200-riyal banknotes at specialized printing facilities in Indonesia. 

This followed a series of failed attempts to produce the notes in Russia, where political pressures had constrained the country’s printing houses.

The agency cited unnamed banking sources who said that “the new shipments entered Yemeni territory by taking advantage of the recent ceasefire, which allowed cargo ships to dock at the port of Hodeidah without undergoing the usual inspection procedures.”

The report noted that the shipments were delivered through al-Zahraa Trading and Agencies, an economic entity affiliated with the Houthis that has been sanctioned by the US Treasury since June 22, 2025, due to its role in money laundering and fund transfers benefiting the group’s leadership.

It added that since 2019, the Houthis have been smuggling advanced printing machines into the military-run Directorate of Moral Guidance’s printing presses as part of a plan to develop local capacity for producing banknotes.

The Yemeni agency concluded that the Houthis are now moving toward purchasing high-quality banknote paper, which could enable them to print additional currency denominations domestically in a more organized manner in the future.

Mustafa Nasr, head of the Center for Economic Studies and Media in Yemen, described the Houthis’ issuance of new currency denominations as an escalatory move. 

While he acknowledged the process is illegal and lacks legitimacy, he said it carries broader implications beyond merely printing banknotes of these values.

Speaking to Al-Estiklal, Nasr explained that the move “is a message from the Houthi movement affirming that it still considers itself capable of managing the economic file and achieving the printing of currency it has long sought to issue, whether produced inside Yemen or abroad.”

He pointed out that printing and circulating currency within their controlled areas represents a significant step for the Houthis, as it allows them to bypass sanctions and the isolation imposed by U.S. penalties, as well as the challenges they face in this regard.

In this context, Nasr suggested that the group will overcome the severe liquidity crisis affecting the local currency. 

He added that the Houthis will not limit themselves to merely replacing damaged notes but will likely take further steps whenever they need to secure additional resources.

The economic expert warned that the move will affect the local currency’s exchange rate, even though it is forcibly fixed in Houthi-controlled areas and does not reflect its true value based on supply and demand. 

He said that anyone dealing in the local currency is compelled to exchange at these official rates, which he described as unfair.

Nasr added that the impact of this move on Houthi-held territories depends largely on the volume of currency the group injects. 

If it is limited to replacing only damaged notes, it is unlikely to cause inflation or further depreciation of the currency in those areas.

“However, if the group continues printing currency and releases further amounts to cover its various expenses, this will create a form of inflation.”

“The broader implications of this move will be severe, potentially triggering a major economic conflict. The internationally recognized government is likely to respond with escalatory measures involving tighter controls over import financing, goods, foreign currency exchange, trade, and many other areas that will need to be redefined,” Nasr added.