After almost a year of crisis, Yemen had embarked on a political transition based on an agreement brokered by the Gulf Cooperation Council (GCC) in November 2011. Yemen concluded a 565-member inclusive National Dialogue process in January 2014 with the decision to transform Yemen into a Federal State. A special committee appointed by the National Dialogue Commission (NDC) determined there would be six entities under the Yemeni Federal State. The Commission also approved a Guarantee Document detailing a roadmap for the implementation of its recommendations, including the extension of the political transition period, constitutional redrafting, the preparation of basic laws to support a federal state, and parliamentary and presidential elections in 2015.
However, in September 2014, the political crisis was reignited and the security situation significantly deteriorated, when Houthis, involved in a decade-long conflict with the Government of Yemen (GoY) for more control in the country’s northern Sa’ada Region, capitalized on an unpopular decision by the GoY to reverse fuel subsidies, and launched several protests in Sana’a. After a short war that ended with Houthi armed militia entering Sana’a, a Peace and National Partnership Agreement was signed on September 21, 2014 calling for renewed commitment to the implementation of the outcomes of the National Dialogue, to be led by a new Prime Minister and a new technocratic government. The security situation temporarily improved following the signing of the agreement, but Houthi militia continued to hold positions at major check points and stayed in control of key government offices and military posts.
Since mid-January 2015, the political crisis has been deteriorating progressively. A Houthi offensive in the capital on January 19-20, 2015 resulted in the resignation of President Mansour Hadi and his cabinet while under house arrest on January 22. Houthis subsequently announced the dissolution of the Yemeni Parliament and the creation of an 18-member “security commission” to rule over the country until the establishment of a 551-member National Transitional Council. In late February, President Hadi escaped from house arrest in Sana’a and has since started taking steps to form a new interim government to run the country’s affairs from the southern city Aden, annulling his resignation in a statement, declaring all actions taken by Houthis since their seizure of Sana’a in September 2014 invalid and unconstitutional.
The power struggle between Houthi forces and those loyal to President Hadi further escalated in March 2015 amid deepening political tensions and an uptick in sectarian violence. There continues to remain a high threat of Al-Qaeda in the Arabian Peninsula (AQAP) or other extremist groups taking advantage of the situation. In late March, two suicide bombers targeted mosques in Sana'a during Friday prayers killing at least 126 people and wounding scores of others., Large-scale armed conflict continued outside the capital . Following the Houthi offensive to capture crucial installations in Taiz and Aden, a coalition of 10 countries, including Saudi Arabia and members of the Gulf Cooperation Council, launched a military campaign in Yemen against al-Houthi rebels.
Yemen is one of the poorest countries in the Arab world. Poverty, already increasing prior to the latest political crisis, has risen further from 42% of the population in 2009, to 54.5% in 2012. Yemen has one of the highest population growth rates in the world and is one of the most food insecure countries globally. Approximately 45% of the population is food insecure and Yemen’s scarce water resources are far below the regional average.
The difficult political and security situation in Yemen continues to weigh heavily on economic activity and Yemen’s economic recovery is highly vulnerable. After the country slipped into recession in 2011 with GDP shrinking by 12.7%, the economy grew by an estimated 4.8% in 2013, but the growth rate is projected to fall to less than 2 percent in 2014. Economic recovery is confronted with several structural challenges; Yemen’s is an oil-based economy with high unemployment and weak governance and institutional structures. In August 2014, Yemen had launched an ambitious economic reform program focused on removal of fuel subsidies, advancing civil service reforms, and enhancing the country’s social safety net. Economic prospects will depend on progress on the political and security fronts and implementation of these critical reforms.
Impact of recent developments on Bank operations
Following a thorough review of the changing political and security environment in Yemen that has significantly affected implementation of World Bank projects, a decision has been taken to suspend all missions to Yemen as of January 23, as well as to suspend all disbursements to projects financed by IDA and Bank managed trust funds as of March 11, 2015. The decision was based on the World Bank’s assessment that an extraordinary situation has arisen which will make it improbable that the Bank will be able to adequately supervise its program, or that Yemen will be able to perform its obligations under the respective agreements. The suspension will be lifted when the situation in the country is such that the government or any project implementing entity are able to perform their respective obligations under the agreements, and the Bank can provide appropriate supervision and fiduciary oversight.
Last Updated: Mar 31, 2015