Yemen at a glance
Full Name: Republic of Yemen
Capital: Sanaa
Area: 527,970 sq km
Population(m): 26.7 (2013)
Head of state: President Abdrabbu Mansour al-Hadi
Currency: Yemeni rial (YR)
Religions: Muslim including Shaf’i (Sunni) and Zaydi (Shi’a), small numbers of Jewish, Christian and Hindu
Languages: Arabic
International organisations: Arab League, UN, OIC, IMF, WTO (observer)

Located at the southern tip of the Arabian peninsula, Yemen is blessed with the most strikingly beautiful geography of the region. But a history of internal security problems has prevented the country from living up to its tourism potential.

Yemen was unified in 1990, precipitating a four-year struggle for power between the old parties of the north and south.  A bloody civil war in 1994 between the Sanaa-based government and the southern former Yemen Socialist Party almost tore the country in half.

After a tumultuous 2011 that saw the departure of an incumbent president who had been in power for over 30 years, Yemen’s new government will be hoping that 2012 will offer more stability for Yemenis across the country.

Ali Abdullah Saleh’s departure after 33 years was not quick, but luckily a bloody civil war was avoided and the elections that were held in early 2012 passed without any major incident.

Now the country’s new president Abdrabbu Mansour al-Hadihas the unenviable task of trying to turn around Yemen’s economy and get the population working again.

To achieve this Al-Hadi will have to look overseas for foreign aid and the IMF has already made a $93.7 million loan to the country, but significantly more is required.

The reality of the situation is that Yemen is effectively bankrupt with massive unemployment issues and millions of Yemenis going hungry on a dailybasis.

In 2011 the political instability and protests, which led to the fall of Saleh also massively contributed to a 5 per cent fall in GDP from the 2010 figure of $31.3bn. In 2012 that figure is again expected to fall by two percent.

To try and inject life into the economy the government in Sanaa has approved a budget of $12.56bn for 2012, a rise of 50 per cent on 2011. Some of the money will be used to cover unpaid wage increases of state workers and the rest will be used for the day-to-day running of the country as well as go towards fuel subsidies.

The majority of the local contribution will come from Yemen’s hydrocarbons assets which include oil and liquefied natural gas (LNG). Hydrocarbons account for over 50 per cent of government revenues and 80 per cent of export income, but resources are dwindling to such an extent that the country is expected to become a net importer of oil by 2016.  

Tribal skirmishes have not helped the supply on oil and attacks on pipelines are expected to cause a decline in oil production of 7 per cent in 2012. Oil production already sank 34 per cent to 170,000 barrels-a-day (b/d) in 2011 and talk of a new government ushering in reforms that could raise production to 500,000 b/d have been dismissed as extremely fanciful by industry experts.

The rest of the money will have to come from foreign benefactors with the US and Saudi Arabia as well as other wealthy GCC states being expected to provide funds to the country.

Saudi Arabia has been donating oil as well as money, but with no sustainable alternative in sight it is doubtful that is going to continue on a long-term basis.

A lack of overseas support is evident from the amount of foreign currency held by the Central Bank of Yemen. In 2011 the figure dropped 25 per cent to $4.3bn from $5.7bn.

To act against inflation the central bank has raised its interest levels to 28 per cent, but this has caused any liquidity that was in the country to dry up and as a result the vast majority of construction projects across all sectors have ground to a halt.

The Middle East projects tracker MEED Projects states that a total of 51 projects worth $150bn are either cancelled or on hold in Yemen across all sectors including hydrocarbons, construction, power and industry.

This compares to eight projects worth a total of $2.3bn for projects at the design, tender or execution phase in the country.

A lack of project activity in any sector has led to mass unemployment with official figures stating 45-50 per cent of Yemenis are not working. Insome areas of the country this figure is believed to be as high as 80 per cent.

No work coupled with a breakdown in infrastructure has led to food shortages and government figures state that 31 per cent of Yemenis are suffering frommalnutrition.

With so many problems on so many fronts no other country in the Middle East has as much to do to turn its economy around as Yemen. High unemployment, food and fuel shortages, crippled infrastructure and political uncertainty have all contributed to an economic downward spiral that could take years to escape from.

As well as attempting to generate cash domestically through higher government spending the new regime will also have the task of persuading foreign nations to donate aid money. This will not be easy as only Saudi Arabia has contributed so far in 2012 with other nations voicing concerns about the lack of security in the country.

The new government has been given a mandate of change from the population, but unless Sanaa can secure the funds to rebuild the country there is no hope that any significant changes will occur in the short or even mid-term.

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Yemen has some of the worst development indicators in the region and, indeed, the world. Gross domestic product per capita was $2,500 in 2010, compared with almost $70,000 in nearby Qatar, while life expectancy is a little over 65 years on average, a good decade below the figure for the oil-rich Gulf states. The UN ranked Yemen at 154 of 187 countries in its 2011 Human Development Index – only Sudan featured lower among the states of the Middle East and North Africa region.

The country’s many problems – a lack of economic development, poor security, dwindling resources and poor public services, such as education, water and electricity – were only exacerbated in 2011, when a civil uprising threw its political system and economy into turmoil.

Government revenues have been severely hit over the first six months of 2012 due to the sabotage of vital energy infrastructure. In March 2011, tribesmen blew up a key pipeline linking the Marib oil field.

The Planning and International Cooperation Ministry in Sanaa estimates that the economy shrank 10.5 per cent in 2011, while inflation hit 23.2 per cent. Foreign currency reserves at the Central Bank of Yemen dropped 24.4 per cent to $4.3bn.

With little business activity during the year, about half the country’s working-age population was unemployed by the beginning of 2012, while 53 per cent of 15-24 year-olds – the biggest and fastest-growing, demographic group – were jobless by the end of the year. Some 44.5 per cent of all Yemenis were food insecure by the end of 2011, according to the Washington-headquartered World Food Programme.

The situation has improved marginally in 2012. The Washington-headquartered IMF forecasts that the economy will contract 0.9 per cent in 2012 before bouncing back to growth in 2013. Inflation fell to about 8 per cent in the first six months of 2012 and so far the government has been able to keep the budget deficit to within forecast levels.

Oil & gas

Before the political turmoil of 2011, Sanaa raised 50 per cent of state revenues through its share of oil exports, while 80 per cent of the value of all Yemeni exports came from hydrocarbons.

The government used the earnings to heavily subsidise fuel sold in the country, at a huge cost to state finances. In 2010, the Central Bank of Yemen calculated that 22.2 per cent of all state expenditure was allocated to fuel subsidies. According to the Washington-headquartered World Bank, the 9 per cent of gross domestic product that Yemen spent on average on subsidies in the years leading up to 2011 made the country the biggest spender on fuel discounts in the Middle East and North Africa.

The BP Statistical Survey states that Yemen has 2.7 billion barrels of oil reserves. Oil production in 2011 shrank 24 per cent from 2010’s figure of 301,000 barrels-a-day (b/d) to 228,000 b/d.

The pipeline carries up to 150,000 b/d of oil, most of which is processed at the nearby Aden refinery and is the main source of domestically produced fuel. The government estimated at the time that the loss of the pipeline cost it $250m-400m to replace lost fuel products by buying them on international markets and $150m in sales.

Yemen also has 16 trillion cubic feet of proved gas reserves and BP states that it produced 6.86 million tonnes of gas in 2011. All of Yemen’s offtake is turned into liquefied natural gas (LNG) and was exported by Yemen LNG.

Yemen economic indicators
  2008 2009 2010 (Forecast)
GDP (at current prices) 26.9 25.1 31.1
Population (millions) 23 23.7 24.4
Population growth (%) 3 3 3
GDP per capita ($) 1,171.1 1,061.9 1,274.4
Real GDP growth (%) 3.6 7.8 3.8
Inflation (%) 19 3.7 9.3
Unemployment (%) na na na
Imports 7,500 7,556 na
Exports 7,600 5,594 na
Trade balance 700 -1,962
Surplus/ deficit    
Surplus/ deficit as % of GDP    
External debt 5,894.0 6,034.0 5,815.0
External debt as % of GDP 21.9 24.0 18.7


Yemen has what is arguably the least developed financial sector in the region. The Central Bank of Yemen oversees the sector, which is made up of 17 banks, only four of them foreign-owned.

A 2010 review of the country’s banking system by the Riyadh-headquartered Arab Credit Reporting Initiative found that just 4 per cent of Yemenis had bank accounts and just 0.6 per cent had access to credit. About 70 per cent of local banks’ capital was invested in government debt, 20 per cent with local businesses and the remaining 10 per cent was placed in foreign banks.

Financial Markets

Yemen has no stock market, but the government hopes to establish one over the next five years. However, given a lack of private-sector appetite for investment in the country and a general lack of economic stability, analysts believe that it will be some time before this will happen.


Yemen lags behind its neighbours in terms of economic development and the biggest non-oil contributor to GDP remains agriculture. There is some light industry in the country, with the manufacture of basic goods and traditional artisanal goods still generating around 10 per cent of economic output.

Construction and real estate

The regional projects tracker MEED Projects states that there are no major construction projects under execution and $355m worth of vital infrastructure projects at the tender phase, but with no definitive timeline for completion.


The state-run Public Corporation for Energy oversees the generation of around 80 per cent of the country’s electricity and Sanaa is in the process of developing three separate independent power plant (IPP) schemes.

However, blackouts are common across the country and many wealthier Yemenis have their own diesel-fuelled generators, of which they make liberal use.

The plans for the IPPs have been delayed in recent years by a shortage of internal capacity and fears over state guarantees. They include a 150MW plant at Aden in the south, another 150MW plant at Hodeidah in the west and a third plant with capacity of 75MW at Al-Mukalla, east of Aden and will be tendered on a build-own-operate-transfer (BOOT) basis.


Water supply is one of the biggest issues currently facing Yemen. The capital, Sanaa, may run out of water supplies by 2020, becoming the first capital city in the world to do so.

Meanwhile, only 17 per cent of the country’s rural population has access to safe water supplies and some 20-40 per cent of all the country’s water is used to grow the mildly narcotic qat leaf, which is so intimately associated with the country.

The World Bank is working with the Yemeni government on a series of water projects, but a radical realignment of government priorities is needed to keep the country’s supply above critically low levels.