The Kingdom of Saudi Arabia announced a new installment of financial support to the Yemeni government's general budget, amounting to US$90 million. This support comes as part of the Kingdom's ongoing efforts to bolster the struggling Yemeni economy and assist the legitimate government in meeting its urgent financial obligations amidst the exceptional circumstances the country is facing.
This amount is part of a larger economic support package that Saudi Arabia previously committed to, which aims mainly to bridge the deficit in the state’s general budget, pay the salaries of public sector employees, and ensure the continued operation of basic services that directly affect the lives of citizens, such as electricity, water and health.
Background to the economic crisis and the halt in oil exports
The Yemeni economy is facing unprecedented challenges as a result of the ongoing conflict for years, but the crisis has worsened sharply following the cessation of crude oil exports, which are the main artery of the state’s resources, as a result of the attacks launched by the Houthi group on export ports in Hadramawt and Shabwa in late 2022. This cessation has deprived the internationally recognized government of the most important sources of income in hard currency, putting public finances on the brink of collapse.
In light of this huge deficit, the exchange rate of the local currency (the Yemeni riyal) has fluctuated significantly against foreign currencies in the liberated areas, causing waves of inflation and a crazy rise in the prices of food and basic commodities, thus exacerbating the humanitarian crisis that the United Nations describes as one of the worst crises in the world.
The importance of Saudi support and its expected impact
This new support is of strategic importance that goes beyond the mere financial figure; it represents a lifeline for the Central Bank of Yemen in Aden, as it helps to strengthen foreign exchange reserves, which contributes to curbing the deterioration in the exchange rate and achieving relative stability in the markets.
On the political and social front, this support strengthens the ability of the Presidential Leadership Council and the Yemeni government to withstand the economic war and enables them to continue providing services to citizens in the liberated governorates. This move also reflects the Kingdom of Saudi Arabia’s ongoing commitment, through the Saudi Development and Reconstruction Program for Yemen, to supporting Yemeni government institutions and preventing state collapse, which is a cornerstone of regional security and stability in the southern Red Sea and Bab al-Mandab region.
It is worth noting that the Kingdom has provided billions in deposits to the Central Bank of Yemen in recent years, in addition to granting oil derivatives to operate power plants, and development projects in various governorates, in a comprehensive attempt to alleviate the impact of the war on the Yemeni people.
