Press Release No. 22/185

IMF Staff Concludes Visit to Yemen

June 7, 2022

• The rise in global commodity prices is exacerbating the economic and humanitarian crisis in Yemen.
• The recent truce, the announcement of a Gulf Cooperation Council (GCC) financing package, and important governance reforms have generated cautious optimism.
• The increase in external financing and domestic resources provides an opportunity to reinforce efforts to enhance transparency and ensure resources are used to support the vulnerable, including to facilitate food, fuel and medical imports.

Washington, DC: An International Monetary Fund (IMF) team, led by Brett Rayner, conducted a virtual and in-person mission in Amman, Jordan with the Yemeni authorities from May 31 to June 7. Discussions covered recent economic developments in Yemen, the outlook, and progress on key reforms. At the end of the mission, Mr. Rayner made the following statement:

“The economic and humanitarian crisis in Yemen is growing. With the population already suffering from 7 years of conflict, the effects of the war in Ukraine have only exacerbated the crisis. According to the World Food Program, the number of food insecure people is projected to reach 19 million (two-thirds of the population) this year as rising global food prices and recent exchange rate depreciation have pushed inflation to nearly 60 percent. As a net importer of fuel, higher oil prices have added to balance of payments pressures and financing needs.

“Despite this challenging environment, recent progress towards peace has improved prospects for economic stability. The continuing truce has had a positive effect on confidence and trade. A significant external financing package announced by the GCC in April, higher remittances, and recent progress in unlocking frozen reserves of the CBY, have led to an appreciation of the Yemeni rial and taken some pressure off domestic prices. With reduced active fighting, modest economic growth of around 2 percent is expected to return in 2022, albeit with considerable uncertainty regarding the evolution of the conflict.

“Recent policy reforms are helping to reinforce exchange rate and economic stability. The introduction of a foreign exchange (FX) auction has promoted an efficient allocation of FX resources and helped to finance critical imports, although participation by banks has been inconsistent. In addition, the recent adoption of the market exchange rate for oil revenues, supported by higher oil prices, has reduced the need for monetary financing of the budget deficit while creating space for higher social spending and infrastructure rehabilitation. The mission encouraged the authorities to bolster auction participation by removing restrictions on the use of FX. The mission also advised the authorities to continue the good progress by adopting the market exchange rate for customs revenues and to accelerate public financial management reforms to promote good governance and efficient use of scarce resources.

“The mission team would like to thank the authorities for the productive discussions and looks forward to continued close engagement.”