March marked the second anniversary of Saudi Arabia’s intervention into Yemen’s civil war at the head of a coalition of Arab military forces. The coalition’s entrance was meant to end the war in a matter of weeks or months but has instead embroiled Riyadh and Abu Dhabi – the kingdom’s main partner in the coalition – in a complex, multifaceted conflict.
Much attention has been paid to the direct impact of the war on civilians through street fighting, indiscriminate shelling of urban areas with artillery, and airstrikes, along with the use of landmines and cluster munitions. However, the war – the latest in a succession of conflicts in Yemen – has also had a devastating effect on the economy in what was already the Arab world’s poorest country, pushing millions of Yemenis from humanitarian crisis into what aid agencies warn will soon be outright famine.
The economic crisis comes at a time when aid agencies, traders, and government institutions are struggling, for a variety of reasons, to deliver much-needed basic goods, and when prices are rising to the point where a large proportion of the population simply cannot afford to eat, in no small part because the overall economy has ground to a halt. Most unsettling, this is a man-made crisis. Many of the limiting economic and logistical factors are driven not so much by the violent nature of the war but by political decisions being made by the parties to the conflict.
This paper was researched and written in late 2016 and early 2017. Based on a series of interviews, on-the-ground research, hard data, and other reporting from key international and local organizations, it builds a narrative of the historical roots and evolution of the economic and humanitarian crisis that predated Yemen’s civil war. It then discusses the current context and offers recommendations for international policymakers for addressing Yemen’s humanitarian and economic crisis.
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- Yemen is in the midst of a deeply complex humanitarian and economic crisis that will not be resolved by a formal end of hostilities, and which threatens the prospects of millions of Yemenis for decades to come.
- The structural drivers of the crisis include a population dependent on subsidized fuel and mass imports of basic commodities, particularly rice and wheat; an economy supporting 26 million people largely dependent on an ailing hydrocarbon sector; a foreign exchange crisis; unsustainable domestic debt; and widespread underdevelopment. These problems have been exacerbated by decision making that has consistently prioritized political gains over human lives.
- Humanitarian delivery and access has been constrained by a de facto naval blockade, the closure of Sanaa airport, the politicization of aid by local militias and other national and regional actors, and a collapse in the wider economy as well as by frontline fighting, particularly in the city of Taiz.
- The ability of traders and other businessmen to bring basic goods like food and fuel into Yemen has been constrained by a combination of naval interdictions of cargo ships entering the country, damaged infrastructure, and issues in the domestic and international banking sectors. These constraints have helped cultivate black and gray markets that directly benefit the key armed groups fighting the war.
- Yemen’s public sector, already overstretched at the beginning of the war, has been strained to the breaking point, particularly the health ministry, and the politicization of state institutions has served to further damage their effectiveness.
- Corruption has spiraled since the beginning of the conflict, and the war has become a moneymaking venture for many armed groups and a new cadre of economic players, creating an incentive system for many people involved in the war to continue fighting.
- Increasing dependence on less formal trade routes and delivery mechanisms has facilitated the flow of arms and other illicit materials into the country, deepening the conflict.
- Since the beginning of the war, the international community has been forced to devote considerable time and energy to mitigating the repercussions of decisions made by the legitimate government of Yemen, the Saudi-led coalition, and the Houthi-Saleh alliance.
- In the case of a number of these decisions, foreign powers have repeatedly cautioned against the actions taken only to find their voices ignored, as with the naval blockade of Yemen during the early days of the war and the relocation of the Central Bank of Yemen from Sanaa to Aden without sufficient planning.
- State control of local institutions varies hugely on a regional basis, with government in some parts of the country largely run by local leaders with little input from either the rebel-led administration in Sanaa or the legitimate government, which operates between Riyadh and Aden.
- A long-planned assault on the Red Sea port of Hodeidah by the Saudi-led coalition would undoubtedly lead to shortages of many staples and rocketing market prices while doing little to weaken the resolve of the Houthi-Saleh alliance to continue the war – and could actually enhance its control over revenue-generating trade routes.
Recommendations for International Policymakers:
- Recognize that alleviating Yemen’s economic and humanitarian crisis is as important as ending the conflict, which in all likelihood will continue for many months if not years. If the war continues, deaths from starvation and preventable diseases may soon outnumber those incurred in combat.
- Recognize that planning for a postconflict future, while important, should not be the top priority. Follow the World Bank’s lead in finding ways to work on the ground through local partners.
- In aid and stabilization preparations, plan and budget for armed hostilities to continue, even in the event of a peace deal or cease-fire arrangement.
- Work with the Yemeni government and the Gulf states to ensure that the Central Bank of Yemen is capitalized with riyals and foreign exchange. If funding cannot be found in the Gulf, look for other sources of hard currency.
- Work to foster communication between staff in the Sanaa-based central bank and the new headquarters in Aden, possibly by setting up a coordinating body in a third country.
- Ensure that civil service payments are made, possibly by setting up a United Nations-overseen fund and distribution mechanism.
- Avoid a military assault on Hodeidah port, and ensure it continues to provide trade access to the bulk of Yemen’s population.
- Give the World Bank’s experimental program the full support of the international community; it should be monitored regularly, and a much larger level of funding should be considered for the future.