Last Chance For Yemen: Experts Warn Only Bold Reforms Can Prevent Total Economic Collapse

The collapse of the Yemeni rial is no longer merely a symptom of prolonged military conflict but a stark indicator of systemic structural failures devastating Yemen’s economy. Crippled by the absence of coherent monetary policies, a halt in oil exports, and rampant mismanagement, the country now faces unprecedented economic disintegration. This freefall threatens to trigger a total currency collapse, deepening the humanitarian catastrophe and intensifying the daily suffering of millions of Yemenis.

On May 9, the Yemeni rial in government-controlled areas collapsed to unprecedented lows, trading at 2,534 riyals per US dollar (buying) and 2,552 (selling). Meanwhile, the Saudi riyal—a regional benchmark—exchanged at 666/669, starkly contrasting Yemen’s economic freefall with its neighbors’ stability.

The Yemeni rial has plummeted by 72% in value since 2018, hemorrhaging nearly a third of its worth annually despite a $500 million Saudi deposit meant to stabilize it, according to the World Food Programme.

This currency implosion has fueled spiraling hyperinflation: fuel prices have surged 33% and food costs 28% compared to 2024, part of a devastating 400% price explosion since 2018.

"My salary is now equivalent to just $33, compared to $336 before the war, while the price of a bag of flour has surged from YR3,000 to over YR50,000". Civil servant Nabil Mohammed Saleh said.

This has driven university academics in Aden, Lahj, Abyan, and Shabwa to protest on May 5, demanding salaries commensurate with pre-2015 purchasing power.

Deeper Causes Than the War

Economic experts contend that the crisis extends far beyond the war. According to analyst Khaled Al-Raimi, the halt in oil exports has cost Yemen $2 billion since October 2022, a devastating blow for an economy already crippled by near-total dependence on imports and critically depleted foreign reserves.

"Halting exports has severed 70% of state revenue. This hemorrhage is compounded by the Houthi-imposed ban on new currency editions and rampant cross-border currency smuggling, which together have sabotaged monetary stability. Meanwhile, systemic rot within Yemen’s banking sector, epitomized by the International Bank of Yemen (IBY), reached a breaking point in April 2023 when money laundering schemes prompted U.S. sanctions". Economic expert Waheed Al-Fouda'ei said.

Hajj Expenses and Speculation

Dr. Ali Al-Masbahi, a prominent economist, warned that the withdrawal of nearly $300 million in Q1 2025 to cover Hajj and Umrah expenses exacerbated Yemen’s economic crisis, driving the exchange rate from 2,070 to 2,500 riyals per dollar. The absence of regulatory oversight by the Aden Central Bank has further enabled speculative practices by certain banks and currency exchanges.

Economic sources accused the government of squandering 600 million allocated for electricity and spending180 million on the Aden refinery with no results, questioning the absence of a new refinery project in Hadramawt.

Failed Rescue Attempts

In late April, the Aden Central Bank, in coordination with the Money Exchangers Association, suspended foreign currency trading for 48 hours, leading to a slight recovery before the daily collapse resumed. However, the "Southern Money Exchangers Syndicate" expressed concern over threats to monetary stability.

Al-Fouda'ei considers the decision temporary and insufficient for a fundamental solution. A bank source acknowledged that the halt in oil exports is the primary cause of the foreign currency shortage, though other factors exist.

On April 29, the bank announced a 30 million, following previous auctions totaling 340 million, of which only $164 million (48%) was sold, according to Al-Masbahi, who believes the auctions failed to stabilize the exchange rate.

In February, Yemen's Central Bank urged the Presidential Council to consolidate state revenues into a single treasury account and align expenditures with national priorities. While the bank confirmed it had proposed concrete measures - including restarting oil exports - these recommendations have yet to receive an official government response.

UN Interventions

Al-Fouda'ei accused the UN of double standards after pressuring the Aden Central Bank to backtrack on relocating banks from Sanaa, despite Houthi violations, including issuing non-compliant coins.

For his part, Abdul Hamid Al-Masajedi, Chairman of the Media and Economic Research Forum, criticized the internationally recognized government for failing to take decisive action following the suspension of oil exports. He noted the administration had actually weakened its position by conceding strategic leverage - notably through permitting fuel shipments into Hodeidah.

Al-Fouda'ei warned that maintaining the export suspension would leave Yemen able to cover just 40% of its budget deficit. He called for immediate crisis measures and a swift resumption of oil exports to avert economic collapse.

Salaries in Dollars

"Al-Masajedi criticized the practice of disbursing dollar-denominated salaries to officials abroad, warning it places undue strain on Yemen's dwindling foreign reserves. He called for stricter oversight of financial transfers between government-held and Houthi-controlled territories.

"As a potential solution, he advocated implementing a unified exchange rate to reduce the disparity between the competing currency versions - though he acknowledged this might drive Houthi authorities toward informal financial channels".

Recommendations to Save the Economy

Experts have outlined a dual-track roadmap to salvage Yemen’s economy, prioritizing urgent revenue generation alongside structural overhauls. First, resuming oil and gas exports—the state’s fiscal backbone—could stem the bleeding, while creating a sovereign wealth fund would channel resource revenues into long-term stabilization. Concurrently, tightening banking oversight and cracking down on currency smuggling are critical to halting the financial system’s disintegration.

Reforms must also target systemic rot: imposing strict revenue controls, abolishing dollar-denominated salaries for officials and unifying the fractured currency system to curb hyperinflation. Crucially, none of this can succeed without leveraging international partnerships for technical aid and emergency financing.

Yemen's economic survival now depends on two critical imperatives: courageous policy reforms to stabilize the financial sector, and unprecedented cooperation among stakeholders to address the worsening humanitarian emergency. Without immediate, coordinated action to restore monetary credibility and curb hyperinflation, the country risks irreversible economic collapse.