The International Monetary Fund (IMF) has warned of negative impacts on Yemen due to the escalation in the Red Sea. The IMF highlighted that since the Houthi attack on oil export ports in October 2022, the government has been deprived of half of its revenues. The fund noted that Yemen’s economic growth decreased by 2% last year, while inflation remained high despite a global decline in food prices.
During the annual consultative meeting between Yemeni authorities and the IMF in Amman, Jordan, Yemen’s delegation, including Central Bank Governor Ahmed Ghalib and Finance Minister Salem bin Breik, discussed the latest economic, political developments, and the outlook for major reforms. Joyce Wong, head of the IMF mission, stated that the loss in oil exports, representing more than half of the government’s revenue (equivalent to 4% of GDP), has widened the public finance deficit to 4.5% of GDP in 2023, putting pressure on foreign reserves and the exchange rate.
The IMF’s mission statement emphasized the challenging humanitarian situation in Yemen, with 17 million people facing food insecurity. The fund acknowledged that disbursements from the Gulf Cooperation Council’s support package and stable remittances from expatriates help alleviate the situation but warned that regional tensions this year could exacerbate Yemen’s fragile condition.
However, the IMF mission pointed out that despite the challenges, Yemeni authorities remain firmly committed to reforms, including continuing to eliminate exchange rate multiple pricing in government transactions and facilitating a foreign currency auction system. The authorities have improved cash liquidity management with tightened spending and better prioritized expenses.
In light of heightened uncertainty, the IMF urged the Yemeni government to accelerate public financial reforms, including improving revenue management while enhancing expenditure priorities and control. Ensuring consistent and predictable foreign currency auctions will help the Central Bank of Yemen maintain its hard-earned credibility amid restricted foreign currency resources, enhancing governance and data collection processes to improve transparency and accountability.
The IMF emphasized the importance of maintaining financial sector stability and compliance with international standards, including anti-money laundering and counter-terrorism financing measures, which facilitate trade and expatriate remittances, vital lifelines for the Yemeni people.
The IMF mission confirmed that continued external financial support is crucial in reducing financial pressures, curbing monetary financing, and stabilizing prices. Active engagement with donors to meet existing needs, improving funding availability, and ensuring its continuity are critical to achieving these goals.
While the IMF pledged to continue providing comprehensive technical assistance to Yemen to enhance its institutional capacities, its mission engaged with key partners and stakeholders to improve cooperation and aid coordination levels.
The IMF expressed deep appreciation for the Yemeni authorities, technical experts, and all counterparts for their excellent cooperation and candid discussions, looking forward to further close and ongoing engagement.