Regional conflict deepens Yemen humanitarian crisis, IMF says

Lender says country’s economic outlook relies on peace talks and reforms

A Yemeni man receives food aid in Sanaa, in February 2023. EPA

Yemen's economy is forecast to contract this year, the International Monetary Fund said on Thursday, as the country's outlook relies on peace talks and a commitment to reforms.

Regional conflict and tension in the Red Sea, where Houthi rebels have been attacking ships for more than a year, have deepened the humanitarian crisis in Yemen, where already more than 17 million people face food insecurity.

Yemen is the Arab world's poorest state and the IMF has not conducted an Article IV mission there since civil war broke out in the country in 2014. The IMF said that external assistance remains critical to support Yemen's humanitarian needs and that its mission has engaged with international partners to support those requirements.

“Economic conditions have continued to deteriorate, with GDP and real incomes further contracting in 2024 due to the significant depreciation of the Yemeni rial amid halted oil exports and limited external financing, and rising inflation,” IMF mission chief Esther Perez Ruiz said in a statement after a staff visit to Amman, Jordan.

The IMF previously projected Yemen's economy to contract by 1 per cent in 2024 before seeing a 1.5 per cent increase this year, according to its Regional Economic Outlook published in October 2024. Inflation is expected to rise from 16.3 per cent last year to 20.7 per cent this year, according to the IMF's October update.

Yemen's fiscal situation is also facing strain, the Washington-based lender said after its January 19-23 visit.

But while the current political stalemate muddies Yemen's short-term economic outlook, the Gaza ceasefire has “cautiously raised hopes” that regional geopolitical tension will ease.

“Capitalising on these developments and resuming internal dialogue to achieve lasting peace together with continued policy reforms would help improve Yemen’s economic outlook,” Ms Perez Ruiz said.

The IMF said Yemen must unify its currency and resume oil exports – which it said accounted for more than half of government revenue before they were suspended in 2022 – to regenerate growth and revenue.