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In Yemen, families suffer as COVID-19 dries up money from abroad

People stand in line to receive vouchers from the World Food Program in Sana'a
People stand in line to receive vouchers from the World Food Program in Sana'a on 3 June. Yemen is seeing a drop in remittances from abroad at the same time as international aid is cut. (Khaled Abdullah/REUTERS)

In a small corner shop on a back street in Aden, 17-year-old Mohammed fills the shelves of a glass-fronted refrigerator with cartons of juice. It’s a futile task when the fridge is little more than a warm display cabinet, after 12 hours without electricity in 36 degrees Celsius of sweat-filled heat.

Added to the daily grind of climbing temperatures, the lack of regular power, and recent flash floods – and amidst a war now in its sixth year – the southern city of Aden has recently become the epicentre of Yemen’s COVID-19 outbreak.

Officially, cases in Yemen are below 850, with 209 deaths, but – with minimal testing capacity and a health system that has largely collapsed – aid agencies warn the real figures are likely far higher.

The country’s first cases were not reported until early April; the first deaths three weeks later. But Yemenis like Mohammed felt the impact of the global pandemic weeks before it emerged on their doorsteps, as measures to mitigate the spread of the coronavirus saw businesses around the world close and workers laid-off or furloughed, leading to a massive decline in the up to $10 billion in remittances Yemenis abroad send home each year

Mohammed’s father has worked in Saudi Arabia for 20 years, most recently as a delivery driver for a car salesroom. He lost his job in March, leaving his family in Yemen without the monthly stipend of 1,000 Saudi riyals ($265) they have lived off for the past two decades. This has made Mohammed, who asked that his surname not be published out of concerns for his father’s safety, the sole breadwinner for his mother and four siblings – the youngest is two years old. All now depend on his part-time job at the shop, which brings in the equivalent of around $45 a month. 

Yemen’s war has pitted Houthi rebels and their supporters against a Saudi Arabia-led coalition, which supports the internationally recognised, but mostly exiled, government of President Abd Rabbu Mansour Hadi and its allies. The conflict has led to the collapse of Yemen’s economy and a massive humanitarian crisis – the UN says 24 million Yemenis, some 80 percent of the population, need some sort of aid. 

Rising food prices, job losses, and the failure of the state to pay the wages of civil servants, teachers, and healthcare workers has seen an increasing reliance on money transfers from Yemeni expats like Mohammed’s father. This money has supported families struggling to survive, and has been crucial to preventing the famine aid agencies have long warned of.

“The malnutrition crisis is going to get worse.”

Abdulwasa Mohammed, policy adviser to Oxfam in Yemen, said the drop-off in remittances could force many Yemenis into a dangerous downward spiral. 

“It’s going to further exacerbate the humanitarian situation,” Mohammed told The New Humanitarian. “Those who usually rely on remittances will have to buy food on credit until that credit runs out. Then they’re at risk of being thrown out of their homes when they can’t pay rent, or being forced to mortgage properties and sell livestock.”

This could force people to reduce the number of meals a day they eat, Mohammed added. “The malnutrition crisis is going to get worse.”

The remittances economy

While there are Yemeni expats across the world, neighbouring Saudi Arabia has long been a major source of employment, and remittances. According to Yemen’s Ministry of Expatriate Affairs, there are 1.6 million Yemeni workers in the kingdom, and they are the source of an estimated 61 percent of remittance inflows through formal financial routes.

Figures vary on how much of Yemen’s economy is made up of money sent home from abroad: official World Bank statistics put it at $3.3 billion in 2014, the year before Yemen’s war began – a number that rose by 12 percent to an estimated $3.7 billion in 2019. 

But this only accounts for what is sent through the official banking system, in a country where just 3.5 percent of people held bank accounts before the war. It leaves out the more popular informal routes for remittances: money transfer companies such as Western Union, MoneyGram, and local transfer agents.

A 2019 report from the Sana’a Center for Strategic Studies, a Yemen-focused think tank, calculated that official remittances sent through banks potentially account for only 2.9 percent of the total, which they estimated to be closer to $10 billion annually. Others put the figure between $6 and $8 billion.

One of Yemen’s most trusted providers for sending official remittances is the Alkuraimi Islamic Bank, which Mohammed’s father usually uses to send money. According to a well-placed source, who asked to remain anonymous to protect his security, transfers through Alkuraimi into Yemen usually average 80 million Saudi riyals ($21 million) per month.

Transfers through Alkuraimi dropped by an unprecedented 70 percent when COVID-19 mitigation measures were first introduced regionally in March, according to the source. The Muslim holy month of Ramadan (24 April to 23 May), usually the busiest time of the year for family members sending money home, saw a slight increase, but transfers through the bank were still down 50 percent from the previous year. 

Other informal Yemeni money exchanges are also reporting dramatic drops, likely not helped by the fact that many branches were forced to close due to COVID-19 restrictions.

In the northern governorate of Sa’ada – a Houthi stronghold that has been heavily bombed during the war – some 30,000 people rely on remittances, according to data collected by Oxfam. Since the onset of COVID-19, Oxfam says the number of remittance transactions handled by one Sa’ada exchange has fallen by more than 95 percent, from over 2,500 per month to just 100 by the end of April.

A three-pronged crisis

The interconnectivity of Yemen’s economy means that a decline in any one of the three major sources of foreign currency – humanitarian aid, oil exports, and remittances – has a significant impact on local purchasing power. 

Yemen is now facing a decline in all three. The loss of remittances comes as oil prices are plunging, and as a reduction in funding is forcing aid agencies and NGOs in Yemen to close down or scale back various humanitarian programmes, including food aid and subsidies to healthcare workers. A 2 June donor pledging conference for Yemen fell more than a $1 billion short of its target, and much of the money promised is unlikely to be delivered for some time. 

All of this is likely to result in a depreciation of the Yemeni rial and worsening food security in Yemen, where food often sits in markets with people unable to purchase it, said Anthony Biswell, an economic analyst at the Sana’a Center for Strategic Studies. 

“We cannot overestimate* the size of the impact that a drop in remittance flows will have on the country, at both the national and local levels,” Biswell warned.

Mohammed and his family were already feeling the pain, and were not optimistic they would see new payments from their father any time soon. “Before, we were living okay, and now it’s kind of…” Mohammed trailed off, frowning. “It will be barren if there’s no more money.” 

Even if Saudi Arabia does recover from the COVID-19-induced economic problems, employees like Mohammed’s father may not regain their jobs. The downturn may well see the Saudi government speed up its recent policy of replacing the foreign workforce in the private sector with Saudi nationals. 

In addition to the immediate impact on Yemeni families, the decline in money from family and friends abroad is likely to have wider economic implications.

Remittances are the primary source of foreign currency in Yemen, a country that imports the vast majority of its food. 

Without much else by way of income during the war, money sent from abroad has been a major factor in keeping these imports coming, explained Alwai Ba Faqih, the minister of expatriate affairs for Hadi’s government. The fall in remittances “is going to be a disaster”, Ba Faqih told TNH. “It is a disaster.”

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The loss of this inflow is also likely to put even more pressure on the exchange rate, resulting in even higher prices – food prices have already risen as a result of the pandemic.

Analysts are warning that the Yemeni rial could lose much of its value in the next six months, because a $2 billion deposit in 2018 from Saudi Arabia to Yemen’s Central Bank in Aden has all but run out.

As of May, only $200 million remained of this money, which had prevented excessive inflation and allowed the Aden bank – the Houthis have a rival institution in Sana’a – to provide a subsidised foreign exchange rate for the imports of food and other basic goods. Earlier this week, southern separatists, who have declared “self-administration” in Aden and other parts of the country, seized a convoy with billions of Yemeni rials headed for the bank. 

One thing that has not been lost in the war is Yemen’s informal social protection networks, which have long superseded a weak state. Communities – in rural tribal parts of the country and in urban areas – look after poorer members and those who need help in hard times. 

While the global and domestic spread of COVID-19 is testing the financial capacity of these networks, they kicked in for Mohammed’s family: a friend of his father gave a crucial 1,000 Saudi riyals ($265) to the family during Ramadan. 

At the corner shop in Aden, in the sizzling heat, a young boy, one of Mohammed’s neighbours, came in brandishing a chicken carcass wrapped in plastic. The boy bought the chicken the day before, but without electricity at his home his family’s food for the day was at risk of ruin.

Mohammed, whose aunt died on 20 May with symptoms consistent with COVID-19, drew back the thick blanket covering the chest freezer – used during power outages as insulation to preserve any remaining coolness – and slipped the plump chicken inside, saving one family’s meal for a day.

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*(A previous version of this article incorrectly used the word underestimate instead of overestimate. The corrected version was republished on 18 June.)

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