The Economy & Finance

Yemen Review section December 27, 2023 11:23 MIN November and December 2023 Houthi Red Sea Attacks Increase Shipping Costs By Wadhah Al-Awlaqi The seizure of an Israeli-linked ship by Houthi forces in the Red Sea and repeated attacks on commercial shipping threaten to pile additional pressure on Yemen’s economy by raising the costs of imports. Shipping to Yemen already incurs increased transport and logistics costs due to its designation as a “high risk” area. According to a 2021 UNDP assessment, war premiums, covering the potential loss or damage to vessels, resulted in insurance costs for shipping to the port of Aden port to be 15 times the regular rate. These additional insurance costs, totaling more than US$20 million per year, are ultimately borne by Yemeni consumers. While the full economic ramifications on shipping to Yemen following the Houthi seizure of the Galaxy… Continue reading Yemen Review section November 20, 2023 19:29 MIN September and October 2023 Prime Minister Denies Allegations of Government Corruption By Wadhah Al-Awlaqi Prime Minister Maeen Abdelmalek Saaed denied allegations of corruption against his government made in a parliamentary report during a press conference on September 4. The alleged violations include mismanagement and corruption amounting to YR2.8 trillion (approximately US$1.9 billion) across the electricity, energy, telecommunications, and financial sectors. Saaed attacked the report of a parliament fact-finding committee, calling the accusations malicious and backed by influential individuals whose personal interests have suffered. He alleged that certain partisan individuals have attempted to obstruct the work of the government, and said that it has formed a committee headed by the minister of justice to respond to allegations outlined in the report. The prime minister defended his government’s performance, noting that it has continued to pay… Continue reading Yemen Review section September 14, 2023 15:16 MIN August 2023 Government Approves Controversial Telecoms Deal By Wadhah Al-Awlaqi The government approved an agreement to establish a joint telecommunications company with an Emirati company to provide mobile phone and internet services in government-controlled areas on August 21, over opposition from several members of parliament. In a letter to Prime Minister Maeen Abdelmalek Saaed, 22 MPs in the government-aligned House of Representatives objected to the proposed sale of Aden Net to NX Digital Technology, a UAE-based technology company, characterizing it as a deliberate attempt to bypass parliament’s supervisory and legislative authority. The MPs called on the government to await the outcome of a report by a parliamentary fact-finding committee studying the deal. In a previous letter sent to PLC head Rashad al-Alimi in mid-July, the MPs said the proposed deal… Continue reading Yemen Review section August 15, 2023 18:57 MIN June and July 2023 Saudi Arabia Announces US$1.2 Billion in New Financial Support Long-waited financial support for the government finally materialized after it reached a dire fiscal situation in June and July. On August 1, Saudi Arabia announced it would support the internationally recognized government with a US$1.2 billion grant to finance the public budget and prop up the value of the Yemeni rial. Saudi Ambassador to Yemen Mohammed al-Jaber stated that the first batch of new funds would be released for use on August 2. The next day, the Central Bank of Yemen in Aden (CBY-Aden) announced that Saudi Arabia had deposited 1 billion Saudi Riyals (nearly US$267 million) into its account. High-ranking government officials, including the CBY governor Ahmed Ghaleb and the Minister of Finance Salem bin Breik, said that funds… Continue reading Yemen Review section June 22, 2023 10:40 MIN May 2023 Houthis Ban Locally Produced Cooking Gas Houthi authorities banned the sale of domestic gas cylinders from Safer in Marib during the last week of May. The heavily populated regions in the north will now be exclusively supplied with imported cooking gas through the Houthi-controlled port of Hudaydah. The decision will further economically undermine the government, already deprived of its main source of revenue following Houthi drone attacks on oil export terminals. This has been compounded by a Houthi campaign to redirect commercial ships from Aden to Hudaydah in order to gain control of customs revenue previously collected by the government. The government could lose close to YR7 billion a month from the new ban. It is estimated that more than 100,000 gas cylinders from Safer are… Continue reading Yemen Review section May 15, 2023 08:49 MIN April 2023 Saudi Arabia Eases Import Restrictions at Yemeni Ports The government-held port of Aden received the commercial ship Blue Nile on April 8, without it being subject to inspection by the Saudi-led coalition at Jeddah, a first since the expansion of the conflict in 2015. The arrival followed a statement released by Aden Governor Ahmed Hamed Lamlas on April 4, encouraging shipping companies to operate direct routes to the port of Aden and announcing several deregulation measures, including the suspension of container fees and action against illegal levies. On April 6, the government-affiliated Ministry of Transport followed up with a statement confirming the eased import restrictions, and said it had informed local and international shippers of the new regulations, which include covering insurance fees for war-related risks, increasing the… Continue reading Yemen Review section April 14, 2023 11:43 MIN March 2023 Houthis Ban Interest in Banking Sector The Houthi-controlled parliament in Sana’a passed a controversial law banning “usurious transactions” on March 21. Houthi authorities pushed the House of Representatives to prohibit interest-based transactions in Yemen’s banking sector after rejecting amendments proposed by the body’s joint legal committee. The law could have disastrous effects on Yemen’s economy, exacerbating its isolation and deterioration and discouraging investment. Parliamentarians appeared pressured to pass the legislation, with four MPs choosing to withdraw from the session in protest. One MP, Ahmed Saif Hashed, characterized the law as unconstitutional and said it would have catastrophic consequences for banks and the rights of citizens. Both the Minister of Finance and the governor of the Sana’a-based Central Bank of Yemen (CBY-Sana’a) refused to endorse the law… Continue reading Yemen Review section March 9, 2023 08:11 MIN January-February 2023 Govt Receives New Financial Support By Wadhah Al-Awlaqi On February 21, Saudi Arabia agreed to supply the Central Bank of Yemen (CBY) in Aden with a US$1 billion deposit to prop up Yemen’s faltering economy and support the value of the rial in government-held areas. The aid will not be deposited directly with the CBY-Aden, but rather handled through the Arab Monetary Fund (AMF) as part of the AMF agreement announced in November. Access to the new money is expected to be granted soon given the progress the government has made to implement reforms demanded by Saudi Arabia, but the inflexible structure of the support could limit the central bank’s capacity to auction foreign currency to stabilize the rial and finance the import of basic commodities. The timing… Continue reading Yemen Review section December 16, 2022 07:55 MIN November 2022 Oil Exports Remain Halted As Govt Agrees Terms for International Support Oil production in government-held areas ground to an almost complete halt early in the month as Houthi drone attacks continued to strangle exports. With oil revenues representing the largest source of income for the government, any prolonged halt to its production and export would have dire effects on economic conditions, including an inability to pay salaries and depreciation of the rial in government-controlled areas. The government successfully scrambled to find more regional and international financial support. On November 17, the International Monetary Fund agreed to provide US$300 million to the Central Bank of Yemen in Aden’s foreign exchange reserves, with US assistance in facilitating transfers through the Federal Reserve. Separate deals to receive long-awaited financial support from Saudi Arabia and… Continue reading Yemen Review section November 14, 2022 07:42 MIN October 2022 Oil Port Attacks Threaten Government Finances Houthi drone attacks on Nushayma and Al-Dabba oil terminals in the latter half of October paralyzed oil exports and threatened to undermine government finances. Although its effects were not felt in October, prolonged loss of oil revenue would cut the government off from by far its largest source of revenue, which would have widespread knock-on effects, including eroding the ability of the Central Bank of Yemen in Aden (CBY-Aden) to continue financing basic commodity imports, support the value of new rials and keep inflation subdued. Representatives from the government-aligned Central Bank of Yemen in Aden (CBY-Aden) met with officials from the International Monetary Fund (IMF) and the US Federal Reserve in early October, with IMF officials praising recent CBY-Aden policies… Continue reading Yemen Review section October 13, 2022 06:25 MIN September 2022 Govt and Saudi Arabia Reach Agreement For New Fuel Grant Economic developments in September centered on the fuel crisis in Houthi-held areas and the continued delay of the Saudi-Emirati economic support package to the government. In early September, Houthi authorities initiated an emergency plan in areas under their control amid reportedly severe fuel shortages. Houthi authorities accused the coalition of being behind the shortage, citing a backup of fuel ships outside the port of Hudaydah, while the government accused the Houthis of manufacturing the crisis by preventing fuel merchants from submitting agreed-upon import documentation. The fuel crisis was ultimately averted in mid-September when the government allowed eight fuel ships into Hudaydah. Although new Yemeni rials remained relatively stable in government-held areas through most of September, the threat of renewed exchange… Continue reading Yemen Review section September 8, 2022 11:10 MIN August 2022 WFP Secures Ukrainian Grain Shipment for Yemen On August 23, the Yemeni government’s Minister of Industry and Trade Mohammed al-Ashwal stated that Yemen has stocks of wheat sufficient to cover approximately four months of consumption during a meeting with the Chamber of Commerce and commercial traders and importers in Aden. Al-Ashwal said that Yemen was establishing supply lines to import wheat from several countries, including Romania and France, and noted ongoing discussions to import wheat from Russia and Ukraine via Turkey. A document allegedly leaked from the Ministry of Trade and Industry on August 12 showed that Yemen had secured access to 176,000 tons of wheat, sufficient to address domestic needs for two and a half months, comprising 70,000 tons in current stocks plus 106,000 tons to… Continue reading