Soaring food prices and unpaid salaries deepen Yemen's economic crisis

World Bank says real GDP per capita has fallen by roughly 58 percent since 2015 as a divided banking system compounds hardship

By LineZotpaper
Published
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As fighting intensifies between Yemen's government and the Houthis, millions of Yemenis are confronting a second battle far from the front lines: salaries that go unpaid or arrive irregularly, rising prices for basic goods, and a divided banking system that makes moving money across the country increasingly complicated.

In Aden, the interim capital of the internationally recognised Yemeni government, the problem is not a shortage of goods in the markets but people's inability to afford them. Salaries have failed to keep pace with the rising costs of food, rent, healthcare and transport, leaving many workers with little left at the end of the month.

Bushra Abdullah Abdulwarith, a government employee in Aden, earns 78,000 Yemeni riyals ($50) a month at the black market exchange rate, while typical household food costs in government-held areas run to about 130,366 riyals ($83), according to estimates by the Yemen Economic Tracking Initiative. That is before rent, transport, healthcare and other expenses.

Abdulwarith told Al Jazeera that rising prices have forced many households to give up almost all non-essential purchases and cut back on some expensive basics, particularly meat. Across the country, displaced families in Marib and unpaid public-sector workers in Sanaa are being forced into similar decisions about what they can afford and what they must go without.

More than a decade of war has devastated the economy. The World Bank says real GDP per capita has fallen by approximately 58 percent since 2015. The fragmentation of Yemen's monetary institutions, with the Houthis running their own bodies since seizing Sanaa in 2014, along with the disruption of oil exports and declining international assistance, have all contributed to the economic decline.

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Analysis

Why This Matters

  • Millions of Yemenis are being forced to choose between food and other essentials as salaries lose value against climbing prices.
  • A divided banking system is fragmenting the national economy, complicating payments, trade and money transfers across front lines.
  • With fighting intensifying, the humanitarian and economic toll is likely to deepen even as international attention focuses on the battlefield.

Background

Yemen has been trapped in conflict since the Houthi movement seized the capital Sanaa in 2014, prompting a Saudi-led coalition to intervene in support of the internationally recognised government. The war has shattered state institutions, disrupted oil exports and left much of the population dependent on assistance. The country's monetary system has split between the two authorities, with each running its own institutions, deepening the economic fragmentation.

Key Perspectives

Households in government-held areas: Civil servants and families describe salaries that no longer cover basic food costs, forcing them to cut back on staples such as meat and to drop almost all non-essential purchases. The two authorities: The government and the Houthis operate separate monetary institutions, and this division complicates the payment of salaries and the movement of money between different parts of Yemen. Economists and international bodies: The World Bank and trackers such as the Yemen Economic Tracking Initiative point to a broader collapse in real incomes, compounded by the disruption of oil exports and shrinking international assistance.

What to Watch

  • Whether the divided banking system remains a barrier to paying salaries and moving money across Yemen, or whether any steps are taken to reunify monetary institutions.
  • Any change in oil export capacity, which is a key source of state revenue and could ease or worsen the economic squeeze.
  • The trajectory of the fighting, with further escalation likely to accelerate displacement, disrupt supply lines and push prices higher.

Sources

Zotpaper

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