For decades prior to the ongoing conflict, Yemen had been vulnerable to recurring budget deficits. The escalation of the ongoing conflict in 2014/15 has had a profoundly negative impact on Yemen’s debt position. Large-scale oil exports ceased, leading to a collapse in public revenues, while banks and pension funds stopped purchasing government debt instruments. Management of the public debt became bifurcated between rival central bank administrations in Aden and Sana’a, both of which suspended payments on foreign and domestic debt obligations. Unable to receive interest payments, public debt holders faced a liquidity crisis, leaving banks unable to honor customer obligations and threatening their solvency, while pension funds have struggled to support retirees. Based on the input and discussions of the Development Champions Forum, this paper outlines the history, characteristics and drivers of Yemen’s public debt and presents recommendations for addressing this crisis.
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The Rethinking Yemen’s Economy initiative aims to contribute to peacebuilding and conflict prevention, (economic) stabilization and sustainable development in Yemen by building consensus in crucial policy areas through engaging and promoting informed Yemeni voices (the ‘Development Champions’) from all backgrounds in the public discourse on development, economy and post-conflict reconstruction in Yemen and by positively influencing local, regional and international development agendas. The project is implemented by CARPO – Center for Applied Research in Partnership with the Orient, DeepRoot Consulting and the Sana’a Center for Strategic Studies. It is funded by the European Union and the Embassy of the Kingdom of the Netherlands to Yemen.
Duration: March 2017 – May 2025
Team: Marie-Christine Heinze (contact person), Jan Hanrath, Thomas Pietzsch
Partners: DeepRoot Consulting, Sana’a Center for Strategic Studies (SCSS)
Donors: European Union, the Embassy of the Kingdom of the Netherlands to Yemen
Get more information on this project through our project website and our one-pager.