Yemen’s economy a victim of war
SANA'A - Chicken is on the dinner table for Ibrahim el-Tayyar’s family only four times a month compared to three times a week a year ago. The family is far from alone in having trouble affording meals as they used to in war-torn Yemen, where prices of food have jumped an average of 40% since the start of the war.
Tayyar, a father of three who makes $215 working for the government, said he can no longer meet his family’s needs. The entire economy in Yemen has been adversely affected by the year-old fight pitting a Saudi-led coalition against Iran-supported Houthi rebels.
An Oxfam survey found that two-thirds of Yemen’s families borrow money to buy food, although, due to growing defaults, it is becoming harder to find lenders. The study warned that poorer Yemenis would not be able to cope with the situation for much longer.
Nearly 14.4 million Yemenis — more than half the country’s population — do not eat enough, said Sajjad Mohammad Sajid, Oxfam country director in Yemen.
Yemen’s economic ills began before fighting began a year ago, experts say, blaming conditions on poor government management and corruption.
Warring parties exchange accusations for putting the economy near collapse. Yemeni President Abd Rabbo Mansour Hadi and his Riyadh-based government blame Iran-backed Houthi rebels and militants supporting former president Ali Abdullah Saleh, who was forced to resign in 2012 after a popular uprising. The rebels say coalition air strikes are to blame.
The Houthis say they overthrew Hadi to reverse price reforms initiated in 2014, increasing the price of oil products 70%. Hadi says their actual plan was to establish a pro- Iranian government in Yemen.
The reality is that the economic ills date to Saleh’s 33-year despotic rule, said Mohammed Afandi, head of the Yemeni Centre for Strategic Studies. “Saleh and his General People’s Congress and supporters took most government positions and revenues,” he said. “There was no minimum governance.”
Pointing out that Yemen’s decades-long tribal and political conflicts, especially between 2000 and the 2011 revolution, contributed to the country’s economic ills, Afandi said the country relied too heavily on aid from the United States and Saudi Arabia instead of initiating reforms.
Under a Gulf Cooperation Council (GCC) initiative, Saleh resigned in 2011 in return for judicial immunity for himself and hundreds of family members, relatives and supporters. Despite that, economic deterioration continued and the heavy losses inflicted by coalition air strikes led to a severe drop in government revenues.
However, government finances in Houthi-controlled Sana’a remained intact as have many business and institutions.
Ahmad Zibara of Yemen’s Central Supervision Agency said the Houthis realised when they captured Sana’a in September 2014 that they would be held responsible for any mismanagement and embezzlement of public funds so they put representatives of their revolutionary commissions in key posts to monitor finances. “Much corruption was contained,” he said.
Yemen, a small producer of crude oil, has suffered a strangling shortage in oil products since the war made it difficult for suppliers to reach sales outlets. This led to a sharp jump in the prices of oil products and a consequent hike in the prices of food. The Houthis accused the Saudi-led coalition of trying to hurt the economy to turn Yemenis against them.
Since the war started, the coalition intended to weaken the Yemeni riyal, said Ahmad el-Tayyar, a financial analyst. “They cause the hike in oil prices, expanded the black market and dumped Yemen’s markets with unnecessary GCC goods to pump foreign currencies out of the country,” he said. Finance Ministry Director-General Ahmad Mohammad Hijir supported this view.
However, the Houthis’ decision to liberate the oil-product market came at the wrong time, said economist Mohammad Said, adding: “Yemen already suffers from a shortage in foreign currencies and oil imports worsened this shortage.”
According to a government report, state revenues dropped 53.7% in 2015 compared to 2014. Economist Nabil el-Tayri said Yemen’s economy shrank 34.7% over the period and estimated economic losses at $75 billion.
In February, the central bank stopped guaranteeing foreign exchange rates for sugar importers and is believed to be planning to do the same for rice and wheat. Financial instability worries importers, who may abstain from importing food, Oxfam said, warning of further hikes in food prices.