Mohammed Al Ghubari

While the Yemeni government is looking forward to a new Saudi intervention to help it pay the salaries of employees in its areas of control due to the severe deficit it faces due to the continued suspension of oil exports, the World Bank predicted that the Yemeni economy will shrink by half a percent during this year. It asserted that the next year will bring a lot of uncertainty, unless restrictions on oil exports end and there is an evolution in political negotiations between the government and the Houthis.

Sources in the Yemeni government spoke of a “difficult economic situation” that makes it unable to pay the salaries of employees in its areas of control during the remaining two months of this year. It has received only the first payment of the 1.2 billion dollar Saudi grant provided to compensate for the suspension of oil exports. It appears that it has so far failed to persuade the Saudi side to release the second installment of the grant due to failure to meet the conditions and requirements set by Riyadh in order to avoid financial violations recorded during the disposal of the previous deposit.

In turn, the World Bank Economic Monitor presented a blurry picture of the future of the Yemeni economy and said that the coming year brings with it a lot of “uncertainty” about the economic scene due to restrictions on oil exports and the ongoing political negotiations. He asserted that the stability of the economic situation depends on the sustainability of foreign exchange flows and political developments

The World Bank predicted that the Yemeni economy will shrink by 0.5%‎%‎، this year due to the suspension of oil exports as a result of the Houthis' targeting of its export ports. It described this as a severe shortage compared to the growth rate witnessed by the country's economy during the previous year. It said that the economy faced another challenge due to the decline in imports and their transfer from Aden to ports controlled by the Houthis, which were reopened within the framework of the truce sponsored by United Nations.

According to the report, this year has witnessed many challenges for the Yemeni economy. The end of the truce sponsored by the United Nations has led to a series of harmful economic developments. He expected this sequence of events to return the economy “to the recession phase.” He mentioned some of these challenges, such as currency fluctuations, rising inflation, and intensifying social unrest, as this affected the decline in the performance of non-oil economic sectors, especially the private sector. The report found that the improvement in the non-oil economic sectors was boosted by an increase in consumer spending by households and the government, which contributed 1.1 percentage points and 1.3 percentage points respectively. It indicated that the data showed a significant 61% decline in imports through the government-run port of Aden from the beginning of the year until last August, while the port of Hodeidah, controlled by the Houthis, saw a much lower decline of 8%. He believed that this transformation has significantly affected the contribution of the port of Aden to the country's total imports.

According to the report, pressure on public finances has increased in areas controlled by the internationally recognized government. The main reason for this is the stagnation of oil exports. The clear decline in government revenues in the first half of 2023 indicates a possible 40% decline during the year. He said that this increasing decline is mostly due to the oil blockade due to the decline in customs revenues due to the shift of imports from the port of Aden.

According to the World Bank, the government has made significant cuts in spending, but these measures “may pose more challenges” to maintaining basic public services and promoting economic growth in the long term. He stated that despite these efforts, the public finance deficit is expected to remain at around 2.9% of GDP in 2023.

According to the report, the oil sector has faced a significant contraction due to the blockade imposed by the Houthis on exports, and this has reduced the average daily production from 61600 barrels in 2021 to 51400 barrels in 2022. He believed that economic growth could be accelerated if there was a permanent truce or a peace agreement was reached. He stressed that these financial difficulties forced the government to take advantage of the emergency withdrawal facilities at the Central Bank of Yemen in Aden, which led to a 10% increase in claims against the government in the first half of 2023 and a 5% increase in the monetary mass in circulation.

Although he referred to the decline in the general inflation rate following the decline in world commodity prices, he said that the situation has seen a significant difference among the regions of Yemen. Sanaa has seen a more noticeable decline in consumer price inflation, while prices in Aden have remained high due to the depreciation of the currency.

As for the government, in a recent report on the economic situation, it accused the Houthis of causing the depletion of the country's foreign exchange reserves, which fell to 1.3 billion dollars in March 2016 instead of 4.2 billion dollars in the same period of the previous year. In addition, the Houthis withdrew 300 billion Yemeni Riyals (1.2 billion dollars) to finance their military operations.

According to these government data, the measures and reforms that have been taken have led to stability in the overall price rate and a reduction in inflation, which recorded an increase of 12.8 percent in the overall average between governorates controlled by the government and those controlled by the Houthis, while the Central Bank aimed to record inflation between 15 and 20 percent