Yemen's north-south economic divide will persist

Significance

Aid commitments are on a downward trajectory. In 2022, donors extended over USD2.2bn in assistance out of a budgeted USD4.27bn. Meanwhile, talks are underway between Saudi Arabia and the Huthis (the Shia rebel movement in control of northern Yemen) on a new truce -- the last ended in October 2022.

Impacts

• Investment and capital expenditure levels across the country will remain low.
• A ceasefire could help the UN and others better assess economic conditions and manage aid more effectively.
• The presence of rival central banks and split currencies will persist through to 2024 at least.
• Saudi Arabia will use funds for aid and rebuilding to extract political concessions from warring parties.
• Yemen’s geographic proximity to the Gulf helps reduce import costs.