Recent Yemeni government data has shown that Houthi practices have inflicted severe losses on the national economy, as the ban on crude oil exports continues alongside threats to its ports and vessels. This situation has deprived the government of one of its most important financial resources, leading to an exacerbation of the financial deficit and rising levels of domestic debt, at a time when authorities are striving to enhance the path to economic recovery and transition towards more sustainable development projects.
According to the Monetary Developments Report issued by the Central Bank of Yemen, the actual implementation of the general budget until the end of 2025 recorded a cash deficit exceeding 48% of total public spending, a level that reflects the pressures facing public finances amid declining sovereign revenues.
Details of the Financial Crisis
The data indicates that public revenues reached approximately 1,435.2 billion Yemeni riyals (around 870 million USD), compared to expenditures that reached 2,773.5 billion riyals (around 1.68 billion USD), resulting in a deficit of 1,338.2 billion riyals (around 811 million USD). This deterioration is directly linked to the halt in oil exports, which were the primary source of budget financing before the export ports in Hadhramaut and Shabwa were attacked, disrupting shipping operations and raising concerns among companies and maritime navigation.
In parallel, the data showed an increase in domestic public debt by 8.8%, reaching 8,596.7 billion Yemeni riyals (around 5.21 billion USD), compared to 7,901.2 billion riyals at the end of November of the same year. The report indicates that direct borrowing from the Central Bank constituted the primary source of financing for this debt, accounting for 90.8%, reflecting the government's reliance on cash financing to cover the deficit gap.
Background & Context
Traditional debt instruments, such as treasury bills, bonds, and Islamic sukuk, contributed only 9.2% of the total debt, highlighting the weakness of the local debt market and the challenges of revitalizing it under the current economic conditions. On the monetary indicators front, data from the Central Bank of Yemen showed that foreign assets rose to 1,933.3 billion riyals (around 1.17 billion USD) by the end of December, compared to the previous month, indicating a limited improvement in reserves.
The issued currency balance also increased to 3,641.1 billion Yemeni riyals, with a slight rise, while the monetary base recorded growth of about 122 billion riyals to reach 4,444.4 billion riyals, reflecting a monetary expansion that could impose inflationary pressures if not controlled. Additionally, the broad money supply rose to 11,429.3 billion Yemeni riyals, amid efforts to maintain stability in the monetary market.
Impact & Consequences
In light of these circumstances, the Yemeni government is intensifying its efforts to enhance partnerships with international institutions, primarily the World Bank, to support the path of economic recovery and expand development programs. During a meeting in Aden, the Minister of Planning and International Cooperation, Afrah Al-Zuba, discussed with the Vice President of the World Bank for the Middle East and North Africa, Othman Diwan, ways to expand developmental support and enhance priorities for the upcoming phase.
The discussions addressed reviewing funded projects in the areas of essential services and infrastructure, alongside institutional reforms and capacity building, with a focus on improving implementation efficiency and ensuring a direct impact on citizens' lives. The Yemeni government emphasized the importance of aligning World Bank programs with its national priorities, particularly in the sectors of health, education, and water.
Regional Significance
Amid escalating economic challenges, concerns are growing about the impact of the situation in Yemen on regional stability. The continued financial deficit and rising domestic debt could exacerbate humanitarian conditions, necessitating urgent interventions from the international community. Strengthening partnerships with international institutions may represent a crucial step towards achieving stability and sustainable development in Yemen.
In conclusion, the economic situation in Yemen requires a swift and effective response from the government and the international community to ensure economic recovery and provide a dignified life for citizens.