- The IMF resumed Article IV consultations with Yemen after an 11-year hiatus. Yemen faces an acute humanitarian crisis and significant macroeconomic challenges after years of civil conflict.
- Supported by the authorities’ stabilization efforts and external financing, the economy is gradually emerging from the deep recession following the suspension of oil exports in 2022, with the pace of contraction moderating and fiscal and external pressures easing. However, the war in the Middle East is expected to weigh on Yemen’s economy this year, while risks to the outlook remain substantial.
- The authorities’ commitment to revenue mobilization and fiscal governance enables the delivery of essential public services. A market-based exchange rate, energy and pro-business reforms, along with creditor dialogue and ongoing external financing, collectively support Yemen’s economic recovery and social stability.
Washington, DC:Â The Executive Board of the International Monetary Fund (IMF) concluded the 2025 Article IV consultation[1]Â with Yemen. The authorities have consented to the publication of the Staff Report prepared for this consultation.
The IMF welcomes the opportunity to resume Article IV consultations with Yemen after an 11-year hiatus. The conflict that began in 2014 suspended the production of key economic indicators and disrupted policymaking. The renewed consultation reflects enhanced institutional capacity and data production.
After years of civil war, Yemen remains one of the world’s most fragile states. The internal conflict has resulted in significant macroeconomic vulnerabilities and a marked decrease in income per capita, leaving over half of the population in urgent need of humanitarian support. It has caused widespread food insecurity, disease outbreaks, mass family displacement, and limited access to clean water. Although international organizations and bilateral partners have provided aid, the scale of the crisis is far bigger than the available resources.
The economy is emerging from the deep recession it entered after oil exports halted in 2022, with GDP contracting by 0.5 percent in 2025 from nearly 10 percent in 2023. The fiscal and external deficits deteriorated sharply at the onset due to the substantial loss of government revenues and foreign exchange inflows following the halt of oil and Liquefied Petroleum Gas exports. They have since narrowed, reflecting major compression in government spending and private demand amidst high inflation, currency depreciation, and lower real incomes, as well as strong support from regional partners and remittance inflows. Despite signs of stabilization, the economic and humanitarian situation remains fragile. Reserves barely cover one month of imports—mainly food, energy, and medicines—and budget limits restrict essential services.
While spillovers from the recent war in the Middle East have so far been contained, Yemen remains exposed to higher global food and fuel prices. The outlook envisages a modest contraction of 0.7 percent this year, amidst rising inflation and weakening private consumption. Higher imports and weak export growth are expected to worsen the external position, strain the exchange rate, and further deplete already low reserves. Meanwhile, the prioritization of essential spending is expected to weigh temporarily on the fiscal balance. From 2027 onward, the economy is expected to begin regaining momentum as inflation declines, real incomes recover, fiscal consolidation eases, and remittances and non-oil exports expand under the authorities’ Agriculture Plan. Over time, rising government revenues are expected to support essential public services and imports, easing the ongoing humanitarian crisis.
The outlook remains exposed to a range of domestic and external risks. Economic precarity could hinder reforms and pose challenges to both economic stability and social cohesion, while successful peace efforts may accelerate the recovery. If prolonged, the Middle East conflict poses substantial risks—particularly through higher food and energy prices, supply disruptions, and lower remittances—which could intensify currency depreciation and inflation, given Yemen’s limited fiscal and external buffers, force import compression, worsening food security and humanitarian conditions.
Executive Board Assessment[2]
Directors agreed with the thrust of the staff appraisal. They welcomed the resumption of Article IV consultations with Yemen after more than a decade and positively noted the tentative signs of economic stabilization despite years of civil conflict and suspended oil exports, which have resulted in one of the world’s worst humanitarian crises. Directors noted that the war in the Middle East appears to have had a limited economic impact on Yemen so far, although the country remains exposed to higher global food and fuel prices. Given that the outlook remains subject to significant downside risks, Directors called for prudent policy implementation, strengthened governance, and carefully sequenced adjustment and reforms to achieve macroeconomic stability, catalyze donor support, and mitigate risks. Continued and deeper IMF engagement, guided by its Strategy for Fragile and Conflict‑Affected States and with sustained technical assistance, as well as support by the international community and development partners are also critical.
Directors commended the authorities for the substantial fiscal consolidation achieved since 2022. To achieve lasting fiscal consolidation while safeguarding essential public services, they welcomed the adoption of a comprehensive fiscal reform plan in line with staff advice and emphasized the need to enhance domestic revenue mobilization, strengthen tax and customs administration, and improve fiscal governance and public financial management. Directors also supported efforts to streamline electricity subsidies and prioritize essential social and development spending to address humanitarian needs and support inclusive growth. Engagement with creditors to support a comprehensive debt treatment is also essential to restore debt sustainability.
Directors positively noted that inflation has eased and encouraged the authorities to maintain a prudent monetary stance, limit monetary financing, and continue enhancing central bank independence. They emphasized the importance of a market‑based exchange rate regime to enhance policy credibility and improve foreign exchange allocation. Strengthening the foreign exchange auction framework and addressing any emerging exchange rate misalignments are key priorities.
Directors considered the relocation of major banks to Aden as an opportunity to strengthen financial stability and integrity. They encouraged extending regulation to all deposit‑taking institutions and enhancing the AML‑CFT framework to safeguard correspondent banking relationships.
Directors stressed that comprehensive structural and governance reforms are critical to foster private sector‑led growth. They underscored the importance of strengthening institutions to address corruption vulnerabilities and ensure social acceptability of reforms. Directors also emphasized the need to enact energy sector reforms and foster basic public services and infrastructure development. They commended the authorities’ commitment to continue improving macroeconomic statistics to support surveillance and policymaking.
It is expected the next Article IV consultation with the Republic of Yemen will be held on the standard 12‑month cycle.
READ MORE: https://www.imf.org/en/news/articles/2026/04/02/pr-26106-yemen-imf-executive-board-concludes-2025-article-iv-consult
