Barran Press
A recent report from the World Bank, released on October 31, 2024, outlines several recommendations to address the financial challenges and mitigate the economic pressures plaguing Yemen, largely due to the ongoing suspension of oil exports.
The report highlights that the halt in oil exports, combined with a heavy reliance on imports, has intensified external pressures, leading to an unprecedented decline in the value of the Yemeni rial. It notes that the Yemeni economy continues to face worsening challenges, with prolonged conflict, political fragmentation, and escalating regional tensions pushing the country toward a deeper humanitarian and economic crisis.
The report points to the increasing economic divide between Houthi-controlled areas and those governed by the internationally recognized government, noting disparities in inflation rates and exchange values that undermine stability and future recovery efforts.
To combat these economic pressures, the World Bank recommends strengthening the resilience of financial institutions in Yemen to manage inflation and tackle public finance challenges. Additionally, it suggests improving trade methods and facilitating access to financial services to alleviate economic stress and prevent further fragmentation.
Dina Awad, the World Bank's Director for Yemen, commented on the situation, stating, “The severity of the economic and humanitarian challenges in Yemen is escalating, yet there remains an opportunity to change this downward trajectory through appropriate support.” She urged immediate actions to address imbalances in public financial accounts and external accounts, reduce food insecurity, and achieve greater stability.
The report also addresses potential risks to Yemen's banking sector, which has faced rising tensions between the Houthis and the internationally recognized government concerning regulatory oversight in the first half of the year. It notes that regional and international mediation efforts have helped ease some of these tensions, but the situation remains fragile.
The World Bank predicts that Yemen's GDP will contract by 1% in 2024, following a 2% decline in 2023, resulting in a further deterioration of real GDP per capita, which has dropped by 54% since 2015.
The report paints a bleak picture of Yemen's economic outlook, exacerbated by ongoing regional conflicts and internal strife that threaten to deepen the country's social and humanitarian crises. It emphasizes that a sustainable peace agreement could spur rapid economic recovery, paving the way for vital external aid, reconstruction efforts, and necessary reforms to stabilize the nation’s economy.
On July 23, the UN Special Envoy for Yemen, Hans Grundberg, announced an agreement between the internationally recognized Yemeni government and the Houthi movement to implement several measures aimed at de-escalating tensions in the banking and aviation sectors.
The agreement includes the cancellation of recent decisions against banks by both parties and a commitment to refrain from similar actions in the future, alongside the resumption of Yemenia Airlines flights between Sanaa and Jordan, with daily flights to Cairo and India as needed.
The internationally recognized Yemeni government faces a severe cash crisis as the local currency continues to plummet, with the rial hitting a historic low against foreign currencies. The exchange rate has reached 2,000 rials to one U.S. dollar, up from 1,676 rials in late April, while the Saudi rial has also depreciated to 524 rials from 441 rials, marking a significant decline.