Yemen's Finance Minister Salem bin Buraik praised Saudi Arabia's "generous support" for his country as it continues to recover from conflict amid global economic headwinds and high inflation.
The move came in response to a request by the Yemeni government to help it address its budget deficit and is being given in support of the Presidential Leadership Council (PLC), the state news agency said. It added that it is also a demonstration of the strong ties between the kingdom and Yemen.
“The provision of economic support by the kingdom of Saudi Arabia to the Republic of Yemen at a value of $1.2 billion reflects the keenness and interest of the kingdom … to achieve economic stability in the region,” Mr bin Buraik said.
He added that the new economic support is an important means of addressing the Yemeni government's budget deficit that would help it to pay salaries and operating expenses.
The economic support will also have a significant effect on ensuring food security in Yemen, he said.
Rashad Al Alimi, chairman of the PLC, welcomed the Saudi assistance, calling it a “safety valve” for the country that confirmed the kingdom's “committed approach to supporting our Yemeni people, their constitutional legitimacy and alleviating their human suffering”.
Yemen, the Mena region's poorest country, was plunged into what the UN described as the world's worst humanitarian crisis by a civil war that broke out in 2015 after Iran-backed Houthi rebels seized the capital Sanaa, forcing the government to flee into exile in Saudi Arabia.
While fighting has largely abated since a now-lapsed UN-brokered ceasefire took effect in April last year, Sanaa and much of the north remain under rebel control.
Mr Al Alimi said Saudi Arabia's economic support was “another decisive message to the Houthi militias that the Yemeni people are not alone, and that it is time for these militias, after practising all means of destruction, to give priority to the interests of our people over the interests of their leaders, to listen to the voice of wisdom and to align themselves with the long-awaited just peace option”.
In June, Saudi Arabia launched development projects worth 1.2 billion Saudi riyals ($320 million) in Yemen's Hadramawt region, officials announced on Sunday.
The foundation stone for the projects was laid in the presence of Mr Al Alimi, and Hadramawt Governor Mabkhout bin Madi, Saudi ambassador to Yemen Mohammed Al Jaber said.
The projects are part of the kingdom's “continuous economic and development support” for the country, the ambassador added.
The kingdom deposited $1 billion in the Central Bank of Yemen in 2012 and another $2 billion in 2018 to cover the import of basic food products.
The aid boost comes as Yemen recovers from the triple shock of conflict, followed by Covid-19 and global food and fuel inflation caused by the Ukraine war.
In June, UN special envoy for Yemen Hans Grundberg said that "economic warfare" between the warring sides has worsened the situation in the country. While the conflict is currently frozen under a regionally brokered ceasefire, Houthi drone attacks on government-run oil terminals had delivered a significant hit to the government's main source of income.
The government has since then struggled to finance basic services and pay salaries.
Earlier this year, the Saudi ambassador to Yemen met the Houthis for talks in Sanaa before prisoner exchanges of about 800 detainees were conducted between the warring sides. Talks in Amman have begun for yet another round of swaps for about 1,400 prisoners.