By Faisal Abu Bakr | 2024-05-18

ADEN -- An International Monetary Fund (IMF) team in early May concluded a consultative mission with the Yemeni authorities in the Jordanian capital that focused on the adverse impact of the Houthis' Red Sea escalation.

During meetings in Amman that began April 28, the IMF team, led by Joyce Wong, discussed economic developments in Yemen, the economic outlook and progress on key policy reforms with the Yemeni authorities.

In a report issued after the meeting on May 2, the IMF said the continued tension in the Red Sea could adversely affect economic activity through trade and financial channels, and reduce external support, including humanitarian assistance.

Growth is estimated to have contracted by two percentage points in 2023 while inflation remained high, despite declining global food prices, the IMF said.

The humanitarian situation remains difficult, with 17 million facing food insecurity.

The loss of oil exports, which accounted for more than half of the government's revenues -- 4% of gross domestic product (GDP) -- is estimated to have widened the fiscal deficit to 4.5% of GDP in 2023, Wong said in a statement.

This adds to pressures on reserves and the exchange rate, she said.

Costs rise, revenue falls

"The halt of oil exports resulting from the Houthis' attacks on ports caused Yemen's budget to lose about $1.5 billion," economist Fares al-Najjar told Al-Fassel.

The ports under government control and the goods coming through them "were subjected to an economic war by the Houthis, which also affected tax and customs revenues as a consequence of the events in the Red Sea," he said.

These revenues decreased by 17% in 2023 from 2022 levels.

The Red Sea crisis also led to an increase in shipping and insurance costs, al-Najjar said.

"The losses are massive even in light of the talk about developing non-oil revenues due to the halt of oil exports," he said.

"Talk of improving revenues, raising collection efficiency and transparency, and other measures that the legitimate government can take will not make up for the loss of revenue from oil exports," he stressed.

"Insurance fees have risen 16-fold from previous levels" amid the Houthis' Red Sea escalation, political analyst Mahmoud al-Taher told Al-Fassel.

The rise in food prices and decrease in wheat imports have "a direct impact on the spread of poverty and famine in a country that has been suffering from the scourge of war," al-Taher added.

"These conditions have placed a heavy burden on Yemenis."