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Feb - 27 - 2021 Download The Version
The past year 2020 was characterized by its disastrous events, most notably the outbreak of the Coronavirus pandemic throughout the world and its consequences at the political, economic and social levels. Fragile and vulnerable countries like Yemen were not far from these repercussions, and the crisis added an additional burden on the Yemeni economy, which was already collapsed by the ongoing war which has been raging for more than six year. Both in the pre- and post-pandemic phases, Yemen had witnessed troubling economic transformations. Perhaps the most important of those transformations was the creation of a de facto forced division of the economy between the areas controlled by the Houthi group (Ansar Allah) and the areas controlled by the internationally recognized government. The decision to ban the newly-printed currency local currency that was taken by the Houthi-controlled CBY in Sana’a was a critical turning point in the course of creating two distinct, or rather more precisely, even conflicting economies. This step paved the way for a situation in which the banking sector was directly involved in and plunged into the ongoing conflict in Yemen, passing double decisions and taking measures that doubled the challenges facing the Yemeni economy and exacerbated the humanitarian crisis, which is the worst in the world. The oil derivatives crisis and the reversal of the agreement to allocate tax and customs revenues from it to hand over salaries to civil employees is one of the manifestations of the economic conflict, which over time takes more tragic forms in the consequences for the lives of citizens in Yemen. Perhaps it is the first time in the history of Yemen since the unification of the northern and southern parts in 1990 in which the volume of trade between government-controlled areas in northern and western Yemen on the one hand and government-controlled areas in the south and east on the other has decreased by 40 percent, according to the report. On the same plane, money transfer fees have increased from government-controlled areas to Houthi-controlled areas to hit a maximum level of 50 percent. At another level of the crisis, figures show that the Yemeni rial lost about 50 percent of its real value during 2020, causing a high escalation of prices of goods and services. This depreciation of the national currency intensified currency speculation that enabled forces outside the banking sector to control the up and down trends of the Yemeni currency in light of the evident inefficacy of government authorities and the Central Bank of Yemen in Aden and their failure to find sustainable solutions and formulate a monetary policy that could contribute to correcting imbalances. It was a difficult year for the private sector, which was subjected to 100 documented violations, including the raids and closure of companies and banks, seizure and confiscation, looting, extortion and other practices carried out by the authorities against the private sector. In this report issued by the Studies and Economic Media Center (SEMC), we present a comprehensive panorama of the state of the economy in 2020, overcoming several difficulties, most notably the lack of data, the state of conflict and the military and political fragmentation that is reflected on all bodies, institutions and individuals.
The past year 2020 was characterized by its disastrous events, most notably the outbreak of the Coronavirus pandemic throughout the world and its consequences at the political, economic and social levels. Fragile and vulnerable countries like Yemen were not far from these repercussions, and the crisis added an additional burden on the Yemeni economy, which was already collapsed by the ongoing war which has been raging for more than six year.
Both in the pre- and post-pandemic phases, Yemen had witnessed troubling economic transformations. Perhaps the most important of those transformations was the creation of a de facto forced division of the economy between the areas controlled by the Houthi group (Ansar Allah) and the areas controlled by the internationally recognized government. The decision to ban the newly-printed currency local currency that was taken by the Houthi-controlled CBY in Sana’a was a critical turning point in the course of creating two distinct, or rather more precisely, even conflicting economies. This step paved the way for a situation in which the banking sector was directly involved in and plunged into the ongoing conflict in Yemen, passing double decisions and taking measures that doubled the challenges facing the Yemeni economy and exacerbated the humanitarian crisis, which is the worst in the world.
The oil derivatives crisis and the reversal of the agreement to allocate tax and customs revenues from it to hand over salaries to civil employees is one of the manifestations of the economic conflict, which over time takes more tragic forms in the consequences for the lives of citizens in Yemen.
Perhaps it is the first time in the history of Yemen since the unification of the northern and southern parts in 1990 in which the volume of trade between government-controlled areas in northern and western Yemen on the one hand and government-controlled areas in the south and east on the other has decreased by 40 percent, according to the report. On the same plane, money transfer fees have increased from government-controlled areas to Houthi-controlled areas to hit a maximum level of 50 percent.
At another level of the crisis, figures show that the Yemeni rial lost about 50 percent of its real value during 2020, causing a high escalation of prices of goods and services. This depreciation of the national currency intensified currency speculation that enabled forces outside the banking sector to control the up and down trends of the Yemeni currency in light of the evident inefficacy of government authorities and the Central Bank of Yemen in Aden and their failure to find sustainable solutions and formulate a monetary policy that could contribute to correcting imbalances.
It was a difficult year for the private sector, which was subjected to 100 documented violations, including the raids and closure of companies and banks, seizure and confiscation, looting, extortion and other practices carried out by the authorities against the private sector.
In this report issued by the Studies and Economic Media Center (SEMC), we present a comprehensive panorama of the state of the economy in 2020, overcoming several difficulties, most notably the lack of data, the state of conflict and the military and political fragmentation that is reflected on all bodies, institutions and individuals.