Saudi War Cost in Yemen Just Rose After $2 Billion Deposit

(Bloomberg) -- Saudi Arabia will deposit $2 billion in Yemen’s central bank to prop up the currency after an urgent request for assistance from their allies to ease an economic crisis engulfing the war-ravaged nation.

King Salman issued the order to help support the rial, which has plummeted amid a lingering conflict between a government backed by Saudi Arabia’s military and rebels supported by Iran.

Saudi Arabia has already poured billions of dollars into the war since assembling a mainly-Sunni coalition in March 2015 to fight the Shiite rebels and restore the rule of President Abd Rabbuh Mansur Hadi.

The conflict has plunged Yemen deeper into catastrophe, with the United Nations estimating that more than 10,000 civilians have been killed and three million displaced. Ahmed bin Daghr, the prime minister of Yemen’s internationally recognized government, said supporting the currency would help avert the risk of “imminent hunger.”

The deposit is “a war-related cost -- like the other forms of foreign aid Saudi is putting into Yemen,” said Jane Kinninmont, senior research fellow at Chatham House. “There are no signs of the war ending any time soon.”

The conflict in Yemen is widely seen as a proxy confrontation between Saudi Arabia and Iran, two powers at opposite sides of the region’s biggest conflicts. Tehran denies that its support for Yemen’s Houthi rebels amounts to direct military assistance against government forces backed by the Saudi-led military coalition.

Sapped by war, the Arab world’s poorest country has weathered a cholera epidemic and now faces famine. Bin Daghr, in an appeal issued by his office, said he was ready to quit if the coalition doubted the performance of his government or the central bank.

Yemen’s rial has fallen to 500 to the U.S. dollar on the black market, compared with the official rate of 380 rials, according to money dealers. The rate before the start of the war was 250 rials to the dollar.

“The kingdom will continue to assist Yemen in its efforts to restore security and stability,” the Saudi government said in a statement.

©2018 Bloomberg L.P.