Salaries the latest casualty in Yemen conflict

The ongoing civil war in Yemen has caused immeasurable pain and heartache, from the thousands of lost lives to the approximately 20 million residents in desperate need of food or other aid.

Now, many public workers are experiencing more severe poverty as they lose paychecks due to suspended salaries.

Reports from Reuters say the existing Yemeni government has pulled the central bank out of the capital city of Sanaa, which is now largely controlled by a rebel movement, and relocated it in Aden, a southern port.

A government employee quoted by Reuters calls salaries “a playing card” in the conflict and complains that countries involved in the Yemen war are ignoring the mass starvation and poverty evident in the country.

While the rebel group has promised to pay public servants, those vows appear to ring empty as banks report months of unpaid wages for many employees.

The Gulf News Journal spoke with Pradyumna Mishra at the global research firm Aranca about the greater context of instability and humanitarian crisis in Yemen. Mishra has more than five years of equity research experience in the Middle East and Europe.

“According to the U.N., the civil war in Yemen has claimed over 10,000 lives and displaced nearly 3.3 million people,” Mishra said. “Of 27 million Yemenis, more than 50 percent are considered ‘food insecure,’ while almost 70 percent lack access to drinking water and proper sanitation.”

Naval blockades have disrupted the imports that Yemen relies on for 90 percent of basic food staples, he said, adding that the country's economy shrank 20 percent in 2015, with runaway inflation at up to 30 percent.

“In this challenging economic-political climate, the central bank ensured the functioning of the banking system until September 2016, and managed the import of basic commodities and paid salaries to public-sector employees,” Mishra said. “The government then decided to move the central bank from the Houthi-controlled Sanaa to port city Aden, alleging the misuse of bank funds, and intending to economically weaken rebels.”

Besides taking banking out of a sector controlled by rebels, Aden is also a better strategic location for the bank, with better access to foreign military aid, he said.

“The move also is expected to strengthen the economic role of Aden, the city closest to the East-West sea trade route," Mishra said.

But he said there are downsides as well.

“The relocation of the central bank nevertheless brings its own set of problems,” Mishra said, citing the “confusion” in banking that led to the unpaid salaries. “The decision created more trouble in the northern region, which is already facing the brunt of the crisis. With hydrocarbon revenues flowing through the banking system, the northern region is expected to face a severe financial crisis due to non-payment of salaries to state employees.”

Mishra called the need to right Yemen’s banking system a necessity for overall stability and growth in a country so badly beset by the ravages of war.

“Restoring confidence in the banking system is a major challenge for Yemen in attempting to manage its international/geopolitical relations and remains the key to bring its economy back on track,” he said.