The Impact of Red Sea Escalation on Yemen's economy

The International Monetary Fund (IMF) has warned of negative effects on Yemen due to escalation in the Red Sea, also affirming that the halt in oil exports since the Houthi attack on oil facilities in October 2022 have deprived the government of half of its revenues.

The Fund said growth in Yemen is estimated to have contracted by 2 percent in 2023 while inflation remained high, despite declining global food prices.

The findings were released after an IMF team held this week its annual consultative meetings with the Yemeni government in the Jordanian capital, Amman.

Also, the IMF mission said the humanitarian situation in Yemen remains difficult with 17 million people facing food insecurity. Disbursements of the GCC support package and stable remittances have been mitigating factors, it noted.

Also, the IMF mission found that “amid high uncertainty, the mission urged the further acceleration of fiscal reforms, including improving revenue administration while enhancing expenditure reprioritization and control.”

And while the IMF pledged to continue to provide comprehensive technical assistance to Yemen to further enhance institutional capacities, it said it held discussions with partners and key stakeholders to enhance synergies and improve coordination of external assistance.

The mission team then expressed deep appreciation to the Yemeni authorities, technical staff, and all counterparts for their excellent cooperation and candid discussions and looks forward to continued close engagement.