IMF Reaches Staff-Level Agreement with Yemen on a New Staff-Monitored Program

IMF News, July 16, 2026

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IMF staff and the Yemeni authorities reached a staff-level agreement on key economic policies and reforms that could underpin a Staff-Monitored Program (SMP).
The proposed 18-month SMP aims to consolidate recent stabilization gains, strengthen policy implementation, and build a credible reform track record.
This staff-level agreement is subject to approval by IMF Management.

Yemen’s economy is projected to stabilize in 2027 as regional conditions improve and domestic demand gradually recovers.
GDP is projected to contract for the fifth consecutive year by 1.5 percent in 2026, reflecting worsening terms of trade, energy shortages, and weak demand.
The current account deficit is projected to remain around 3.4 percent of GDP.
Reserve coverage is projected to remain below adequate levels.
The external position will continue to depend heavily on remittances and sustained donor support to finance a largely humanitarian-related import bill.
Yemen’s fragile debt position and limited access to external financing underscore continued reliance on international support in the near term.

The SMP aims to strengthen public finances and substantially reduce the budget deficit over 2026–27.
Given significant spending cuts since oil exports stopped in 2022, fiscal consolidation will focus mainly on increasing domestic revenue collections.
Key fiscal measures and actions:
- Liberalized the customs exchange rate in May 2026 to align customs duty and GST revenues more with the actual value of imports.
- Plan to strengthen tax compliance, particularly among large taxpayers and state-owned enterprises.
- Bring previously off-budget revenues and expenditures into the central government budget starting in 2026.
- Strengthen expenditure controls across central and local government entities.
- Reduce idle cash balances and consolidate balances of various government entities as part of efforts to establish a Treasury Single Account.
Increased Saudi budget support is expected to move the fiscal position into a small deficit.

Monetary and exchange rate policies under the SMP aim to preserve price stability and strengthen external resilience.
Policy design elements:
- Monetary policy implementation guided by clear quantitative anchors, with money supply growth aligned to underlying demand.
- Strict limits placed on budgetary monetary financing.
- Greater exchange rate flexibility to support external adjustment and allow the exchange rate to act as a shock absorber.
- Priority on gradually rebuilding international reserves from critically low levels, supported by prudent liquidity management and stronger FX-market functioning.

Strengthening financial sector intermediation, stability, and integrity is a central objective of the program.
Agreed measures include:
- Adoption of comprehensive risk management regulations for the banking sector.
- Expansion of oversight to cover all deposit-taking institutions.
- Improvement of transparency through publication of banks’ audited financial statements.
- Adoption of risk-based anti-money laundering and combating the financing of terrorism (AML/CFT) supervision.

The SMP supports a broad structural reform agenda to enhance public sector efficiency, improve private sector competitiveness, and reinforce social protection for the most vulnerable.
Electricity sector reforms:
- Adoption of a phased plan to gradually increase cost recovery in the electricity sector to improve financial viability, reduce overreliance on budget subsidies, and attract investment to expand generation capacity and reliability.
Social protection:
- Authorities plan to protect social spending and lay foundations for rebuilding a targeted social protection system.

Sustained reform implementation under the SMP, stronger policy credibility, and enhanced transparency would:
- Strengthen Yemen’s fiscal position and enhance its capacity to repay.
- Lay the foundation for substantive discussions with international partners on meaningful debt restructuring.
- Over time, help lay the foundations for stronger, more sustainable, and inclusive growth, supported by the international community.

The IMF staff team expresses appreciation to the Yemeni authorities for constructive dialogue and strong cooperation and looks forward to continued close engagement as the agreed reform agenda advances.
The mission took place in Amman from July 5 to 16, 2026, led by Ms. Esther Pérez-Ruiz; the mission will not result in a Board discussion and the views expressed are those of IMF staff.

International Monetary Fund — Press Release, July 16, 2026