Yemen Economy Profile 2016
Yemen is a low-income country that faces difficult long-term challenges to stabilizing and growing its economy, and the current conflict has only exacerbated those issues. The ongoing war has halted Yemen’s exports, pressured the currency’s exchange rate, accelerated inflation, severely limited food and fuel imports, and caused widespread damage to infrastructure. At least 82% of the population is in need of humanitarian assistance.
Prior to the start of the conflict in 2014, Yemen was highly dependent on declining oil resources for revenue. Oil and gas earnings accounted for roughly 25% of GDP and 65% of government revenue. The Yemeni Government regularly faced annual budget shortfalls and has tried to diversify the Yemeni economy through a reform program designed to bolster non-oil sectors of the economy and foreign investment. As part of these reform efforts, Yemen exported its first liquefied natural gas in October 2009. The international community supported Yemen’s efforts toward economic and political reform in part by establishing the Friends of Yemen group. In 2012, the Friends of Yemen pledged nearly $7 billion in assistance to Yemen. In July 2014, the government continued reform efforts by eliminating some fuel subsidies and in August 2014, the IMF approved a three-year, $570 million Extended Credit Facility for Yemen.
However, the conflict that began in 2014 stalled these reform efforts. Rebel Huthi groups have interfered with Ministry of Finance and Central Bank operations and diverted funds for their own use. Yemen’s Central Bank reserves, which stood at $5.2 billion prior to the conflict, currently stand at $1.5 billion. The Central Bank is exposed to approximately $7 billion in overdraft, more than three times the legal limit, directly linked to the Huthis withdrawing $116 million on a monthly basis. The private sector is hemorrhaging, with almost all businesses making substantial layoffs. The Port of Hudaydah, which handles 60% of Yemen’s commercial traffic, was damaged in August 2015 as a result of the conflict and is only operating at 50% capacity. Access to food and other critical commodities such as medical equipment is limited across the country due to security issues on the ground. The Social Welfare Fund, a cash transfer program for Yemen’s neediest, is no longer operational and has not made any disbursements since late 2014.
Yemen will require significant international assistance during and after the protracted conflict to stabilize its economy. Long-term challenges include a high population growth rate, high unemployment, declining water resources, and severe food scarcity.
Read More: Indexmundi
- Jan 02, 2017