IMF Staff Concludes Staff Visit to Yemen

IMF News, May 2, 2024

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An IMF team, led by Joyce Wong, conducted a mission in Amman, Jordan with the Yemeni authorities from April 28th to May 2nd.
Press Release No. 24133 — End-of-Mission press release conveying preliminary findings after the visit.

The halt in oil exports since the attack on oil facilities in October 2022 continues to weigh on Yemen’s economy.
Growth is estimated to have contracted by 2 percent in 2023.
Inflation remained high in 2023, despite declining global food prices.
Economic outlook depends on the progress on the Yemen peace talks, continued commitment to reforms, and the evolution of regional tensions.
In 2024, Yemen’s already fragile situation could be exacerbated by regional tensions; an escalation of the Red Sea tensions could adversely affect economic activity through trade and financial channels, and lower external support including humanitarian assistance.

The loss of oil exports, which represented more than half of the government’s revenues (4 percent of GDP), is estimated to have widened the fiscal deficit to 4.5 percent of GDP in 2023.
The widened fiscal deficit has added to pressures on reserves and the exchange rate.
External financing will be essential to maintain macroeconomic stability, fund humanitarian needs, and support the reform process.
Disbursements of the GCC support package and stable remittances have been mitigating factors.

The humanitarian situation remains difficult with 17 million people facing food insecurity.
Lower external support, including humanitarian assistance, would worsen economic and humanitarian outcomes.

Authorities remain committed to reforms, including:
- Further aligning multiple exchange rates for government transactions.
- Refining the FX auction system.
Cash management improvements noted:
- Better expenditure control and prioritization have contributed to limiting the budget deficit, recourse to monetary financing, and associated inflationary pressures.
Mission urged acceleration of fiscal reforms, including:
- Improving revenue administration.
- Enhancing expenditure reprioritization and control.
Recommendations for central bank and financial sector:
- Ensure consistency and predictability in FX auctions to help the central bank preserve credibility amidst constrained FX resources.
- Strengthen central bank governance and improve data collection to enhance transparency and accountability.
- Continue to preserve stability in the financial sector and further strengthen compliance in line with international frameworks, including AML/CFT, and national standards.
Emphasis on facilitating trade and remittances as key lifelines for the Yemeni population.

External financial support remains critical to help ease fiscal pressures, limit monetary financing, and preserve price stability.
Active engagement with donors to address outstanding needs, and improving the availability and consistency of financing, will be crucial.
The IMF will continue to provide comprehensive technical assistance to Yemen to further enhance institutional capacities.
The mission held discussions with partners and key stakeholders to enhance synergies and improve coordination of external assistance.

The mission team expressed deep appreciation to the Yemeni authorities, technical staff, and all counterparts for their cooperation and candid discussions and looks forward to continued close engagement.

IMF Staff Concludes Staff Visit to Yemen — Press Release No. 24133, May 2, 2024.