Economic Hardship Deepens in Yemen

Washington, November 17, 2025 - Yemen's economy remained under severe strain in the first half of 2025 as the continued blockade on oil exports, rising inflation, and declining aid have compounded with years of conflict and institutional division, according to the World Bank's latest Yemen Economic Monitor. The Fall 2025 edition, "Navigating Increased Hardship and Growing Economic Fragmentation," finds that real GDP is projected to decline by 1.5 percent in 2025, a contraction that threatens to further heighten food insecurity across the country.

In areas under the control of the Internationally Recognized Government (IRG), households are facing mounting economic hardship as inflation erodes purchasing power. As of June, the price of a basic food basket was 26 percent higher than a year earlier, following a marked depreciation of the Yemeni rial on the Aden market, which reached an all-time low of YER 2,905 per US dollar in July. Stabilization measures helped strengthen the currency, bringing the exchange rate back to YER 1,676 per US dollar by early August. The report highlights that IRG revenues fell by 30 percent compared to the same period last year, forcing the government to implement spending cuts that have disrupted public services and delayed salary payments to civil servants.

In Houthi-controlled areas, airstrikes on key ports and persistent liquidity shortages have further restricted imports and access to essential goods. The financial sector faces growing difficulties, with banks relocating from Sana'a to Aden to avoid sanctions and regulatory constraints. International assistance, a critical lifeline for millions, has also continued to decline. As of September 2025, only 19 percent of the USD 2.5 billion required under the UN Humanitarian Response Plan for Yemen had been funded, marking the lowest level in over a decade.

With limited donor support, high food prices, and shrinking job opportunities, more than 60 percent of households in both IRG- and Houthi-controlled areas report inadequate food consumption, with many resorting to negative coping mechanisms such as begging.

"Economic stabilization in Yemen depends on strengthening the systems that keep services running and livelihoods protected," said Dina Abu-Ghaida, World Bank Group Country Manager for Yemen. "Restoring confidence requires effective institutions, predictable financing, and progress toward peace to allow economic activity to resume and recovery to take hold."

The report projects that economic prospects for 2025 remain bleak. The continued blockade on oil exports, limited foreign exchange reserves, and declining donor support have constrained the IRG's ability to sustain essential services and finance imports.

While the challenges are significant, the report outlines critical measures that can support near-term stability and long-term recovery. These include strengthening public financial management, enhancing revenue mobilization, and protecting basic services - particularly by building capacity in the electricity sector. The report also emphasizes the need to preserve the currency and safeguard the banking sector by effectively implementing the phased reforms outlined in the IRG's "Plan for Economic Developments and Urgent Priorities" announced in December 2024.

Risks to the outlook remain significant. Without progress toward peace Yemen's recovery will remain uncertain. Successfully advancing the reform agenda could help revitalize the economy and lay the groundwork for sustainable growth.