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The Panel of Experts Err on Yemen

اقرأ المحتوى باللغة العربية

On January 22, 2021, the Panel of Experts (PoE) on Yemen issued its annual report to the United Nations Security Council. This year’s report summarizes the PoE’s views on the peace process as well as on the security, stability and economic situation in the country during 2020. The report leveled accusations of corruption, money laundering and elite capture against the internationally recognized government of Yemen, the Aden-based Central Bank of Yemen (CBY) and Yemeni food importers, relating to a US$2 billion deposit made by Saudi Arabia in 2018 to help finance the import of commodities and stabilize the Yemeni rial. Although the panel’s mandate is to report on acts that threaten the peace, security and stability of Yemen, the section on the use of the Saudi deposit included a number of significant factual and methodological errors which, if left unaddressed, could themselves have dire consequences for the humanitarian crisis in Yemen.

My reflections here are limited to Part B of the report’s Section IX, “Economic context and overview of finance”,[1] and the associated Annex 28, “Case Study on the Saudi Deposit: embezzlement of 423 Million USD.”[2] These reflections do not in any way apply to other sections of the report.

The PoE report makes three main claims with regard to the use of the Saudi deposit. First, CBY-Aden and the government violated the former’s mandate and Yemeni laws by selling foreign currency to food importers below the market rate. Second, these preferred rates were not reflected in food prices and market exchange rates, hence the report determines these transactions to have constituted corruption and money laundering. Third, practically all food-importing companies in Yemen (91 in total) – particularly the largest importer, the Hayel Saeed Anam (HSA) Group – are party to a money-laundering and diversion-of-funds operation, representing a form of elite capture.

In the following sections, I will highlight the factual and methodological flaws in the report, as well as the potential repercussions on food security and the humanitarian situation in Yemen.

Illegality of the Preferential Exchange Rate

The PoE report claims that the government-implemented policy of giving food importers a preferential exchange rate is illegal, as it violates “a number of Articles in the Central Bank Law No. 14 of 2000 and the provisions of Law No. 21 of 1991 regarding the CBY.”[3] It further argues that “central banks throughout the world are, in theory, profit-making institutions for their governments. However, the CBY in Aden is clearly not acting in the best interests of the [government] in this case.”

It is a well-known fact – and a public one – that CBY provided food importers with a preferential exchange rate for imports supported by the Saudi deposit as part of its stated monetary policy to manage the exchange rate.

It is not clear why the PoE references both Law 21 (1991) and Law 14 (2000), given that the latter superseded the former. Perhaps the PoE was only able to find an article remotely relevant to its claim in the outdated 1991 law. That article stipulates that CBY should aim to secure “the largest possible return from dealing with highly rated banks in order to obtain the highest possible return while observing the safety factor. And dealing with the Bank for International Settlements, the Arab Monetary Fund, and the World Bank to manage part of these reserves (sic).”[4] This article, however, is irrelevant to the PoE’s claim as it relates to deposits made by CBY internationally, and not to the issue supposedly being analyzed by the PoE, which is the management of foreign exchange monetary policy in the country.

In the current, applicable law, which is unequivocally clear in defining the mandate of the CBY, there is no such article. Law 14 (2000) states that “the main objective of the bank is to achieve price stability and preserve that stability and provide adequate liquidity to create a stable financial system based on market mechanisms.” Articles 2, 23 and 47 of the law clearly require the CBY to design a foreign exchange regime in consultation with the government to achieve price stability.

The PoE’s claim that the mandate of central banks worldwide is to make a profit for their governments is debatable, but to claim that this should be the mandate of a central bank in a conflict-affected country like Yemen raises serious questions about the PoE’s technical expertise and knowledge of the subject at hand.

What is certain is that the CBY and the government did not violate any mandate or laws in adopting a preferential exchange rate policy. Whether or not this was the best policy approach to achieve price stability and address food insecurity in the Yemeni context is debatable, but a PoE report is not the platform for such a debate.

Corruption and Money Laundering

The PoE claims that the preferential exchange rate offered to food importers through the Saudi deposit was not reflected in the value of the Yemeni rial or in food prices. As a result, the PoE concluded that the administration of the Saudi deposit was corrupt and amounted to money laundering. This accusation is leveled not only at the CBY and the government, but also at food importers in Yemen, virtually all of whom have benefitted from the Saudi deposit.

To support its claim, the PoE states that “in 2019, the Yemeni rial depreciated by 23 percent versus the United States dollar and as a result, the price for the minimum food basket increased by 21 percent.”[5] As evidence, the report cites an August 2020 World Food Programme (WFP) report. However, the WFP report refers to a year-on-year change in prices from August 2019 to August 2020, not for the year 2019, as the PoE claims. The PoE also references a November 2020 WFP assessment, which reported that “the cost of the minimum food basket had increased remarkably during the first half of 2020.”

These dates are critical because the Saudi deposit was primarily used between October 2018 and January 2020, as documented by the PoE report itself.[6] Thus, any assessment of the impact of the deposit should focus on this period and not, as the PoE does, on a later period.

Indeed, an examination of WFP and World Bank reports focused on exchange rates and food prices from this earlier period leads one to a conclusion at odds with that reached by the PoE. In December 2018, the WFP reported that “the Yemeni rial started to regain its value since mid-November slowly. The steady recovery of the Yemeni rial and its continued gains against foreign currencies including the US dollar resulted in a significant decline in the prices of food and fuel commodities.” This report goes on to state that “during the month of reporting, the national average exchange rate stood at YR517/US$1, appreciated by 15 percent from the previous month.” The exchange rate began moving up again at the end of 2019, mainly when the use of the deposit slowed down and eventually stopped, showing the use of the Saudi deposit had a clear positive impact on the exchange rate.

A World Bank report from December 2019 also points out that “continued import financing support by the CBY Aden has played a vital role in stabilizing the prices of essential food during 2019.” This report notes, correctly, that “a range of other factors – parallel market exchange rate, political and security instability, uncertainties in trading and import arrangements, dual taxation, and fuel availability – also affect food prices.” This is a crucial point, which the PoE completely ignores.

Elite Capture

The PoE report states that 91 food-importing companies in Yemen “received a US$423 million windfall by simply applying for the letter of credit mechanism representing a bonanza for their business and personal wealth. In the panel’s view, this represents a clear case of money laundering and diversion of funds perpetrated by a government institution, in this case the CBY, to the benefit of a select group of privileged traders and businessmen.”[7]

The PoE singles out the HSA Group as the recipient of 48 percent of the deposit, labeling this share a form of “elite capture”. The report fails to mention, however, that HSA Group, the leading business and industrial conglomerate in Yemen since the 1960s, has been the largest food importer in Yemen for years.

A 2018 World Bank report noted that HSA Group accounted for 50 percent of wheat imports to Yemen between 2014 and 2016. For the PoE to take one statistic (the proportion of the Saudi deposit allotted to the HSA Group) without situating it in context is a questionable investigative practice.

The PoE asserts that “between mid-2018 and August 2020, the Hayel Saeed Anam Group made a profit of approximately $194.2 million from the letter of credit mechanism alone, excluding profits made from the import and sale of commodities.”[8] It appears that the PoE reached this conclusion by doing a back-of-the-envelope calculation based on the spread between the PoE’s reported market exchange rate – no exact source is provided for that rate – and the CBY exchange rate offered through the Saudi deposit.

According to the PoE report’s Annex 3, which includes a summary of the panel’s correspondence, the PoE did not even bother to contact the HSA Group in order to request details on its pricing or to give it the opportunity to reply before the report was published.

I believe this PoE report to be a serious violation of the “do no harm” principle. The report makes serious and unsubstantiated accusations against all of Yemen’s food importers, based on faulty logic and poor practice. The panel’s conclusions are a significant overreach of its mandate.

Yemen’s food importers are the country’s lifeline. The panel’s overreach is a threat to food security in a country the UN itself describes as “the world’s worst humanitarian crisis.” Already, food importers in the country report facing additional difficulties with food suppliers and international banking transactions due to the PoE report. The PoE exists to report on the state of the war and monitor the sanctions regime. But this year, the panel has negatively contributed to the war’s impact on Yemeni citizens.

This commentary appeared in Houthis at the Gates of Marib – The Yemen Review, January-February 2021


  1. “Final report of the Panel of Experts on Yemen,” UN Security Council, January 25, 2021, pp. 36-38,;
  2. Ibid. pp. 222-240;
  3. Ibid. pp. 229;
  4. Ibid.;
  5. Ibid. pp. 37;
  6. Ibid. pp. 223-224;
  7. Ibid. pp. 225;
  8. Ibid. pp. 38.

The Sana’a Center for Strategic Studies is an independent think-tank that seeks to foster change through knowledge production with a focus on Yemen and the surrounding region. The Center’s publications and programs, offered in both Arabic and English, cover diplomatic, political, social, economic and security-related developments, aiming to impact policy locally, regionally, and internationally.