| current account = −$1.236 billion (2017 est.)
| revenue = $2.821 billion (2017 est.) At the time of unification, South Yemen and North Yemen had different but equally struggling underdeveloped economic systems. Since unification, the economy was further harmed by Yemen's support for Iraq during the 1990–91 Persian Gulf War because Saudi Arabia had expelled almost 1 million Yemeni workers, and both Saudi Arabia and Kuwait significantly reduced economic aid to Yemen. The 1994 civil war further drained Yemen's economy. As a consequence, Yemen relied heavily on aid from multilateral agencies to sustain its economy. In return, it pledged to implement significant economic reforms. In 1997 the International Monetary Fund (IMF) approved two programs to increase Yemen's credit significantly: the enhanced structural adjustment facility (now known as the poverty reduction and growth facility, or PRGF) and the extended funding facility (EFF). In the ensuing years, Yemen's government attempted to implement recommended reforms: reducing the civil service payroll, eliminating diesel and other subsidies, lowering defense spending, introducing a general sales tax, and privatizing state-run industries. However, limited progress led the IMF to suspend funding between 1999 and 2001.
In late 2005, the World Bank (which extended Yemen a four-year US$2.3 billion economic support package in October 2002, together with other bilateral and multilateral lenders) announced that, as a consequence of Yemen's failure to implement significant reforms, the World Bank would reduce financial aid by one-third over the period July 2005 through July 2008. A key component of the $2.3 billion package — $300 million in concessional financing — was withheld, pending the renewal of Yemen's PRGF with the IMF, which was under negotiation. However, in May 2006 the World Bank adopted an assistance strategy for Yemen providing for $400 million in International Development Association (IDA) credits in 2006-2009. In November 2006, at a meeting of Yemen's development partners, a total of $4.7 billion in grants and concessional loans was pledged for the period of the years from 2007–2010. Despite possessing significant oil and gas resources and a considerable amount of agriculturally productive land, Yemen remains one of the poorest of the world's low-income countries. In 2018, more than 80 percent (2018) of the population lived in poverty. The influx of an average 1,000 Somali refugees per month into Yemen looking for work was an added drain on the economy, which already coped with a 20 to 40 percent rate of unemployment. Yemen remained under significant pressure to implement economic reforms, lest it face the loss of badly needed international financial support.
As a result of civil war, Yemen suffered from inflation and devaluation of the Yemeni rial, and Yemen's economy contracted by 50% from the start of the civil war on 19 March 2015 to October 2018.
Macro-economic trend
thumb|right|Historical GDP per capita development
This is a chart of trend of gross domestic product of Yemen (since unification) at market prices estimated by the International Monetary Fund with figures in millions of Yemeni Rials.
{| class="wikitable"
|-
! Year || Gross domestic product || US dollar exchange || Inflation index (2000=100)
|-
| 1989 || 125,562 || 11.70 Yemeni Rials || 5.10
|-
| 1995 || 516,643 || 40.49 Yemeni Rials || 51
|-
| 2000 || 1,539,386 || 161.00 Yemeni Rials || 100
|-
| 2005 || 2,907,636 || 191.37 Yemeni Rials || 175
|}
For purchasing power parity comparisons, the US Dollar exchanged at 150.11 Yemeni Rials and mean wages were $1.06 per man-hour in 2009.
Remittances from Yemenis working abroad and foreign aid paid for perennial trade deficits. Substantial Yemeni communities exist in the Arabian Peninsula, Indonesia, India, East Africa, the United Kingdom, and the United States. Beginning in the mid-1950s, the Soviet Union and People's Republic of China provided large-scale assistance to the YAR. This aid included funding of substantial construction projects, scholarships, and considerable military assistance.
The following table shows the main economic indicators in 1994–2023 (with IMF staff estimates in 2025–2029).
{| class="wikitable sortable sticky-header" style="text-align:center;"
!Year
!GDP<br /><small>(in bn. US$PPP)</small>
!GDP per capita<br /><small>(in US$ PPP)</small>
!GDP<br /><small>(in bn. US$ nominal)</small>
!GDP growth<br /><small>(real)</small>
!Inflation rate<br /><small>(in Percent)</small>
!Government debt<br /><small>(in % of GDP)</small>
|-
|1990
|24.20
|1,845
|12.64
|n/a
|n/a
|n/a
|-
|1991
|26.59
|1,951
|14.67
|6.3
|44.9
|n/a
|-
|1992
|29.43
|2,078
|17.96
|8.2
|51.2
|n/a
|-
|1993
|31.33
|2,131
|21.74
|4.0
|61.7
|n/a
|-
|1994
|34.15
|2,237
|28.02
|6.7
|71.3
|n/a
|-
|1995
|36.85
|2,327
|12.80
|5.7
|63.9
|n/a
|-
|1996
|39.26
|2,398
|6.50
|4.6
|38.8
|n/a
|-
|1997
|42.03
|2,493
|6.84
|5.2
|4.6
|n/a
|-
|1998
|45.05
|2,595
|6.32
|6.0
|11.5
|n/a
|-
|1999
|47.42
|2,655
|7.64
|3.8
|7.9
|96
|-
|2000
|51.49
|2,803
|9.68
|6.2
|11.0
|61
|-
|2001
|54.65
|2,894
|9.85
|3.8
|11.9
|61
|-
|2002
|57.68
|2,973
|10.69
|3.9
|12.2
|58
|-
|2003
|61.02
|3,063
|11.78
|3.7
|10.8
|57
|-
|2004
|65.15
|3,185
|13.87
|4.0
|12.5
|52
|-
|2005
|70.96
|3,377
|16.73
|5.6
|9.9
|44
|-
|2006
|75.46
|3,489
|19.06
|3.2
|10.8
|41
|-
|2007
|80.09
|3,591
|21.65
|3.3
|7.9
|40
|-
|2008
|84.62
|3,682
|26.91
|3.6
|19.0
|36
|-
|2009
|88.43
|3,735
|25.13
|3.9
|3.7
|50
|-
|2010
|96.40
|3,953
|30.91
|7.7
|11.2
|42
|-
|2011
|85.88
|3,421
|32.73
| −12.7
|19.5
|46
|-
|2012
|85.44
|3,306
|35.40
|2.4
|9.9
|48
|-
|2013
|92.76
|3,487
|40.42
|4.8
|11.0
|48
|-
|2014
|94.19
|3,442
|43.23
| −0.2
|8.2
|49
|-
|2015
|68.45
|2,433
|42.44
| −28.0
|22.0
|58
|-
|2016
|62.63
|2,167
|31.32
| −9.4
|21.3
|77
|-
|2017
|60.51
|2,041
|26.84
| −5.1
|30.4
|84
|-
|2018
|62.37
|2,051
|21.61
|0.8
|33.6
|87
|-
|2019
|64.73
|2,077
|21.89
|2.1
|15.7
|91
|-
|2020
|60.01
|1,880
|20.22
| −8.5
|21.7
|87
|-
|2021
|62.12
|1,903
|19.39
| −1.0
|31.5
|76
|-
|2022
|67.55
|2,027
|23.53
|1.5
|29.5
|66
|-
|2023
|68.58
|2,013
|18.81
| −2.0
|0.9
|81
|-
|2024
|69.52
|1,996
|16.19
| −1.0
|16.3
|85
|-
|2025e
|71.84
|2,017
|16.22
|1.5
|20.7
|78
|-
|2026e
|78.30
|2,152
|18.19
|7.0
|13.7
|70
|-
|2027e
|84.92
|2,284
|21.05
|6.5
|11.2
|58
|-
|2028e
|91.67
|2,415
|22.94
|6.0
|10.0
|53
|-
|2029e
|98.48
|2,542
|24.52
|5.5
|10.0
|50
|}
Integration issues
In the south, pre-independence economic activity was overwhelmingly concentrated in the port city of Aden. The seaborne transit trade, upon which the port relied, collapsed with the closure of the Suez Canal and Britain's withdrawal from Aden in 1967. Only extensive Soviet aid, remittances from south Yemenis working abroad, and revenues from the Aden refinery (built in the 1950s) kept the PDRY's centrally planned Marxist economy afloat. With the dissolution of the Soviet Union and a cessation of Soviet aid, the south's economy effectively collapsed.
Since unification, the government has worked to integrate two relatively disparate economic systems. However, severe shocks — including the return of approximately 850,000 Yemenis in 1990 from the Persian Gulf states, a subsequent major reduction of aid flows, and internal political disputes culminating in the 1994 civil war — hampered economic growth.
Industries
Agriculture and fishing
thumb|300px|[[Khat cultivation in western Yemen near At Tawilah]]
left|thumb|Fish market in Yemen (2013)
Agriculture is the mainstay of Yemen's economy, which has generated more than 20 percent of the country's gross domestic product (GDP) since 1990 (20.4 percent in 2005 according to the Central Bank of Yemen). Agriculture employs more than half (54.2 percent in 2003) of the working Yemeni population. However, a U.S. government estimate suggests that the sector accounted for only 13.5 percent of GDP in 2005. Numerous environmental problems hamper growth in this sector — soil erosion, sand dune encroachment, and deforestation — but the biggest problem by far is the scarcity of water. As a result of low levels of rainfall, agriculture in Yemen relies heavily on the extraction of groundwater, a resource that is being depleted. Yemen's water tables are falling by approximately two meters per year; it is estimated that Sanaa's groundwater supplies could be exhausted by 2030. The use of irrigation has made fruit and vegetables Yemen's primary cash crops. With the rise in the output of irrigated crops, the production of traditional rain-fed crops such as cereals has declined. According to the Central Bank of Yemen, the production of khat, a mildly narcotic and heavily cultivated plant that produces natural stimulants when its leaves are chewed, rose 6.7 percent in 2005 and accounted for 5.8 percent of GDP; the consumption of khat is widespread in Yemen. According to the World Bank and other economists, cultivation of this plant plays a dominant role in Yemen's agricultural economy, constituting 10 percent of GDP and employing an estimated 150,000 persons while consuming an estimated 30 percent of irrigation water and displacing land areas that could otherwise be used for exportable coffee, fruits, and vegetables. The World Bank predicted that Yemen's oil and gas revenues would plummet during 2009 and 2010, and would fall to zero by 2017 as supplies ran out; and then the UK's Royal Institute for International Affairs warned that instability in Yemen could expand a zone of lawlessness from northern Kenya to Saudi Arabia, while describing Yemen's democracy as "fragile" and pointing to armed conflicts with Islamists and tribal insurgents as causes of instability. As a result, Western entities and other diplomats and leaders have an interest in maintaining Yemen's stability averting adverse outcomes.
During the years immediately following unification (1990–96), Yemen experienced a very high average rate of inflation, at 40%. Economic reforms brought the inflation rate down to only 5.4 percent in 1997, but high oil prices and cuts in the fuel subsidy in recent years have had a negative impact on the inflation rate, which has generally been on the rise despite some fluctuations. In 2004, efforts by the Central Bank of Yemen to tighten the money supply were offset by a weakening U.S. dollar - to which the Yemeni riyal is linked in a managed float - and by rising global commodity prices, resulting in an inflation rate of 12.5%. In 2018 the inflation rate was 33.65%.
In July 2005, the government succumbed to public opposition and lowered the new general sales tax from 10 to 5 percent.
Banking and finance
According to economists, Yemen's financial services sector is underdeveloped and dominated by the banking system. Yemen has no public stock exchange. The banking system consists of the Central Bank of Yemen, 15 commercial banks (nine private domestic banks, four of which are Islamic banks; four private foreign banks; and two state-owned banks), and two specialized state-owned development banks. The Central Bank of Yemen controls monetary policy and oversees the transfer of currencies abroad. It is the lender of last resort, exercises supervisory authority over commercial banks, and serves as a banker to the government. Since the end of 2005 and up to the end of 2010, Tadhamon International Islamic Bank has maintained the top spot of all banks in Yemen (both Commercial and Islamic) in terms of total assets, capital, and trade business. The largest commercial bank, the state-owned Credit and Agricultural Cooperative Bank, and the majority state-owned Yemen Bank for Reconstruction and Development are each currently being restructured with the goal of eventual privatization. Because of fiscal difficulties in both banks, Yemen government adopted a plan to merge all three banks in 2004; the new publicly owned Development Bank will have a minimum capital of US$50 million. As of April 2011, this step has not yet materialized.
As of 2025, no equivalent publicly documented ACD regulation has been confirmed for ports outside the control of the internationally recognised government, such as Port of Hodeidah, which is administered by Houthi-aligned authorities, or Port of Mocha, where control and administrative practices differ. Requirements at these ports may vary and are typically confirmed through local agents or shipping lines.
External debt
In 1990 the newly unified Republic of Yemen inherited an unsustainable debt burden amounting to roughly 106 percent of gross domestic product. Debt rescheduling by the Paris Club creditor countries in the 1990s coupled with assistance from the World Bank's International Development Agency resulted in a drop in Yemen's debt stock to US$5.4 billion (an estimated 39 percent of gross domestic product) by year-end 2004. According to the Central Bank of Yemen, Yemen's debt stock was US$5.2 billion (an estimated 33 percent of gross domestic product) by year-end 2005. According to the U.S. government, Yemen's reserves of foreign exchange and gold were US$6.1 billion in 2005.
In early 1995, the government of Yemen launched an economic, financial, and administrative reform program (EFARP) with the support of the World Bank and the IMF, as well as international donors. These programs had a positive impact on Yemen's economy and led to the reduction of the budget deficit to less than 3% of gross domestic product during the period 1995–1999 and the correction of macro-financial imbalances. The real growth rate in the non-oil sector rose by 5.6% from 1995 to 1997.
Yemen is missing some international support because, as of 2024, it is one of three countries which have not ratified the Paris Agreement to limit climate change.
References
External links
- Map of the Yemen oil and gas infrastructure