Introduction: The World Bank warns of the collapse of the Yemeni economy
Recent World Bank reports confirm that the ongoing conflict in Yemen, fueled by Iranian intervention through its support of the Houthi militia, has exacerbated the country's economic and humanitarian crises to an unprecedented degree. Yemen is currently experiencing the world's worst humanitarian and economic crisis, with the war having devastated infrastructure, destroyed growth prospects, and led to a sharp contraction in GDP.
The historical context of the economic crisis in Yemen
The roots of the current economic collapse can be traced back to late 2014, when the Iranian-backed Houthi militias seized control of the capital, Sana'a, and state institutions, including the Central Bank of Yemen. Even before the war, Yemen was already ranked among the poorest countries in the Middle East and North Africa region. As the conflict escalated in 2015, the Yemeni economy shrank by more than half. The war fractured financial institutions, resulting in two separate monetary policies and a significant disparity in the exchange rate of the local currency (the Yemeni rial) between areas controlled by the internationally recognized government and those controlled by the Houthis.
Impact of Houthi attacks on oil exports and government revenues
According to World Bank assessments, one of the most significant factors that recently exacerbated the crisis was the Houthi militia's attacks on oil export terminals in the Hadramawt and Shabwa governorates in late 2022. These attacks brought crude oil exports to a complete halt, depriving the internationally recognized Yemeni government of its most important source of hard currency (approximately 65% of total public revenue). This stoppage resulted in a substantial budget deficit, severe difficulties in paying government employee salaries, and a further decline in the value of the Yemeni rial, which directly led to soaring prices for basic commodities and food.
Local repercussions: a suffocating humanitarian and economic crisis
Domestically, Yemeni civilians are paying the heaviest price for this Iranian-backed war. World Bank and UN data indicate that more than 80% of Yemen’s population is in dire need of humanitarian assistance and protection. Hyperinflation and a collapse in purchasing power have exacerbated food insecurity, with millions of families facing the threat of famine. Basic services such as healthcare, education, electricity, and water have also collapsed, further increasing the suffering of civilians across Yemen’s governorates.
Regional and international impacts of the conflict
The repercussions of Iran’s war in Yemen have not been confined to the country itself, but have extended to pose a regional and international threat. The Houthis’ continued attacks on international shipping lanes in the Red Sea and the Bab al-Mandab Strait have disrupted global trade. This regional escalation has led to increased maritime insurance costs, further raising the cost of imports to Yemen, which relies on imports for 90% of its basic needs. This tension also hinders regional peace efforts and transforms Yemen into a flashpoint of conflict that threatens the stability of the entire Middle East.
Summary and World Bank Vision for the Future
The World Bank concludes in its reports that any genuine economic recovery in Yemen remains contingent upon reaching a comprehensive political settlement that ends the coup and stops the war. Without a lasting peace and the reunification of economic institutions, the crises will continue to worsen. The international community emphasizes the need to halt Iranian interference, which prolongs the conflict, and to direct efforts toward reconstruction and supporting the Yemeni economy to avert a total collapse that could have dire consequences for international peace and security.
