Yemen’s currency, the riyal, has sunk to historic lows in recent days, in a new threat to the war-torn country which is already on the brink of famine.

In the government-controlled southern capital of Aden, the dollar is trading at more than 1,000 riyal, the highest rate since the war began in 2014, when Iran-backed Houthi militias seized the northern capital of Sana’a.

The currency has lost some six percent in the south in the past three weeks. Meanwhile the riyal trades at about 600 riyals to the dollar in rebel-controlled areas, which stretch across much of the country’s north.

A source at the central bank in Aden said that it was taking action to prop up the currency, amid growing social discontent in areas controlled by the government, which is backed by a Saudi-led military coalition.

“Inspection teams affiliated with the Yemeni central bank, in cooperation with prosecutors and the police, are carrying out a wide-ranging campaign against exchange rate manipulators,” the source said.

Yemenis were already up in arms over the high cost of living in a country where more than 80 percent of the population depends on international aid.

Yemen, one of the world’s poorest countries, is struggling through what the United Nations calls the world’s worst humanitarian crisis.

Famine could become part of the country’s “reality” in 2021, UN Development Programme chief Achim Steiner said in March after a donor conference raised $1.7 billion in aid for the country — just half its target.

The UN has also emphasised that Yemen’s crisis is an “income famine” where food is unaffordable, more than a situation where food is not available.

— Rival central banks —

Yemeni economist Mostafa Nasr said the decline in the riyal has been driven by escalating violence in parts of Yemen, including a fierce battle for Marib city, the government’s last piece of territory in the north.

“A unified monetary policy is a priority to achieve stability for the Yemeni riyal,” Mostafa Nasr said.

The Houthis have established their own central bank in Sana’a and are seeking to strengthen their monetary and financial independence.

On the other hand, the Aden central bank, which has access to international financial markets, has increasingly turned to printing new currency notes to cover the government’s deficit and pay public sector wages, especially those of security and military forces.

That has inevitably sparked criticism in the north, where only the increasingly tattered old riyal notes are accepted.

“Aden’s central bank has signed contracts with private companies to print 5.32 trillion riyals over the last six years,” said Hashim Ismail, governor of the central bank in the northern capital Sana’a. “We can fairly say that it is three times what the Sana’a central bank printed in 60 years.”

Yemen’s economy was fragile even before the war erupted in 2014, but the International Monetary Fund now describes it as facing “an acute economic and humanitarian crisis.”

Spiralling inflation has compounded the misery in a country where most of the 29 million people rely on aid to stay alive.

— Rival rates —

The result is that even Yemen’s exchange rate is split. The rate for the new notes in Aden hit 1,000 riyals to the dollar this week. In Houthi-held Sana’a, the rate was about 600.

Aden central bank, which did not respond to several requests for comment, has sought to shore up the weakening currency by doubling interest rates last year and warning foreign exchange houses against exceeding the official exchange rate of 580 riyals.

The Aden government said on Tuesday it had “full confidence” that Saudi Arabia would intervene before the economy collapsed.

President Abd-Rabu Mansour Hadi, whose government was ousted from Sanaa by the Houthis in late 2014, moved the central bank to Aden in 2016. He accused the Houthis of squandering $4 billion of bank reserves on the war. The Houthis say the funds were used to finance food and medicine imports.

Rafat al-Akhali, a fellow of practice at Oxford’s Blavatnik School of Government, said the northern exchange rate was kept artificially strong. “The exchange rate is maintained through suppressing demand and completely controlling supply,” he said.

He said the government in the south “continues to use questionable processes in payment of public salaries with no clear payroll for military and security forces.”

The IMF and the United Nations have tried since 2018 without success to reunite the central banks as part of wider stalled efforts to end the war.

Hadi’s government accuses the Houthis of diverting port revenues from Hodeidah, the main entry for Yemen’s commercial and aid flows. The Houthis want the coalition to lift the blockade before agreeing to any renewed peace talks.

With the Muslim holiday Eid al-Adha approaching in July, supermarkets in Aden have tried to lure customers in with offers on imported items. But many people cannot afford even the basics.

“Our situation in Aden has deteriorated so much,” said Oum Ahmed Nabeel, a government employee in the southern port city.

Meanwhile, Yemenis who have to send money across the frontline face costs that can amount to almost 60% of the value of the transaction because of the different exchange rates and associated transfer fees. “It is unfair,” said Mohammed Ahmed al-Hadhari, manager of a Sana’a money exchange agency.