Yemen: Concluding Statement of the 2025 IMF Article IV Mission
IMF News, October 9, 2025
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- Published: October 9, 2025
Overview
- The IMF resumed Article IV consultations with Yemen after an 11-year hiatus.
- The 2014 conflict halted a three-year Extended Credit Facility (ECF) arrangement, suspended production of key economic indicators, and disrupted policymaking.
- Renewed consultation reflects enhanced institutional capacity and improved data provision.
- Yemen faces an acute humanitarian crisis and deep macroeconomic vulnerabilities; over half the population is in urgent need of humanitarian assistance.
Economic conditions and recent developments
- Real GDP contracted by approximately 27 percent over the past decade.
- Per capita income "plummeted" (qualitative description in source).
- After the Houthis’ attacks on oil facilities halted oil exports in 2022, Yemen became an oil importer.
- Government revenues declined from 22.5 percent of GDP in 2014 to below 12 percent in 2024.
- Public debt surged to over 100 percent of Internationally Recognized Government (IRG) GDP, with arrears accumulating to most external creditors.
- Current account deficit expanded from 2.1 percent of GDP in 2014 to almost 11 percent of GDP by 2024.
- International reserve coverage declined to less than one month of imports.
- Saudi Arabia provided about $2 billion over 2023–24 in financial support.
- 2024: GDP contracted by 1.5 percent.
- Inflation hit 27 percent in 2024 and rose above 35 percent year-on-year by July 2025.
- Yemeni rial weakened by 30 percent since the beginning of 2025 (through July), prompting FX stabilization measures in August by the IRG.
- Current account deficit improved from 40.6 percent of GDP in 2022 to an average of 14.5 percent over 2023–24, driven by import compression, robust remittances, and bilateral grants.
- Staff project a moderate GDP contraction of 0.5 percent in 2025.
- Outlook assumes inflation eases later in 2025 as the Yemeni rial has appreciated and stabilized in response to FX measures adopted in August 2025.
Policy response since 2022
- Significant fiscal adjustment:
- Government revenues fell by more than 8 percentage points of GDP since 2022 due to halted oil exports, trade shifting to northern ports, rising smuggling, and governorates unduly retaining central government revenue.
- Government spending was reduced by 5.4 percentage points of GDP.
- With strong Saudi grant support, the deficit dropped by over 10 percentage points of GDP since 2022, reaching 1.9 percent of GDP in 2024.
- Government financing relied mainly on Treasury overdrafts; the Central Bank of Yemen (CBY) sterilized these primarily using Saudi deposits to sell foreign exchange (FX) reserves and control money supply growth and inflation.
- FX management and controls in 2025:
- National Committee for the Regulation and Financing of Imports (NCRFI) established in July 2025 to enhance import transparency and channel FX into the formal banking sector.
- Temporary measures: limits on foreign currency exchanges; prohibition on using foreign currency for local transactions; revocation of licenses for money exchangers suspected of currency manipulation.
- These measures coincided with a notable appreciation and stabilization of the Yemeni rial and contributed to lowering inflation.
Outlook and risks
- Medium-term growth projection:
- Growth expected to gradually increase from 0.5 percent in 2026 to approximately 2.5 percent by 2030.
- Drivers: rising non-oil exports, remittances, and production of refined oil products for electricity generation and consumption; Agriculture Plan and accelerated execution of development projects.
- Inflation outlook:
- Expected to ease further, aided by lower global food and oil prices and strictly limited monetary financing.
- Key downside risks:
- Domestic: renewed internal conflict, social unrest from economic precarity, hindering reforms and destabilizing the economy.
- External: rising global commodity prices causing currency depreciation and inflation; decreased grant support leading to budget shortfalls, further import compression, and worsened humanitarian conditions.
- Contingency needs:
- If adverse risks materialize, authorities should intensify revenue mobilization and spending rationalization.
- Due to minimal reserves and a challenging humanitarian context, additional international support would be required to address significant adverse scenarios.
Policy priorities and recommendations
- Fiscal sustainability and revenue integrity:
- Link expenditure authorizations to timely revenue remittances by governorates starting in 2026.
- Improve port oversight, unify and remit taxes and customs duties by governorates, and integrate revenue institutions.
- Implement the Short-Term Emergency Revenue Plan (created with IMF support).
- High-impact tax policy measures: value customs at market exchange rates, update customs duties, and improve compliance.
- Expenditure optimization and public financial management:
- Strategically streamline expenditures through upstream consultation during budget planning; reallocate funds to priority areas; cut inefficiencies; safeguard essential services.
- Reduce electricity subsidies by gradually aligning tariffs with costs while ensuring social protection for lifeline users.
- Improve bill collection; discontinue unfavorable Purchasing Power Agreements; tackle corruption.
- Implement rigorous expenditure controls across IRG governorates; enhance cash management; improve fiscal transparency by digitalizing tax administration; address payroll irregularities to contain the wage bill.
- Unlocking additional financing and creditor engagement:
- External financing is essential to sustain government operations, maintain critical public services, avert deeper humanitarian deterioration, and support exchange rate stability.
- The $368 million Saudi financing package announced in September 2025 for budget, energy, and health support, plus support from the United Arab Emirates, is a positive step and may attract additional aid if IRG policy efforts continue.
- Public debt remains unsustainable at over 100 percent of IRG GDP as of mid-2025, underscoring the need for comprehensive creditor negotiations to restore debt sustainability.
- Central Bank of Yemen (CBY) priorities:
- Maintain focus on controlling inflation, upholding a market-driven exchange rate, and ensuring financial integrity.
- Continue limiting monetary financing of fiscal deficits and sterilizing excess liquidity through the sale of FX assets; discontinuing monetary financing is necessary for price stability given critically low official reserves.
- Ensure the rate used for imports by the NCRFI remains closely aligned with the market rate to prevent distortions; further assessment is needed regarding alignment with Article VIII of the IMF’s Articles of Agreement.
- Expand financial sector oversight to cover all deposit-taking institutions to bring liquidity to the banking sector and reduce financial stability risks.
- Strengthen bank supervision, know-your-customer practices, and close monitoring of Houthi-linked transactions following the United States' designation of the Houthis as a Foreign Terrorist Organization (FTO) in early 2025, which prompted major banks to relocate their headquarters to Aden.
Structural reforms for medium-term recovery
- Strengthen institutions to improve governance and investor confidence.
- Implement stricter AML/CFT policies; improve fiscal management via expenditure controls, a treasury single account, and enhanced tax and customs transparency and accountability.
- Reduce barriers to business activity and facilitate exports to support job creation.
- Electricity sector reforms: build out renewable energies and enhance the grid for transmission and distribution to improve access and service delivery.
- Reforms are contingent on political stabilization and external support and are vital for economic recovery, social cohesion, and improved well-being.
Closing
- The mission welcomes the IRG’s Economic Recovery Plan (ERP) emphasis on public finance sustainability, controlling inflation, and strengthening governance and institutions.
- Additional external financial support remains crucial as Yemen navigates this critical phase.
- The mission thanks the Yemeni authorities and various stakeholders for their cooperation and candid discussions.
Concluding statement: IMF Communications Department, October 9, 2025.