In September 2014, the agreement in Yemen brokered by the GCC following the Arab Spring events of 2011 fell through. The political crisis was reignited and the security situation deteriorated when Houthis capitalized on an unpopular decision by the Government of Yemen to reverse fuel subsidies, and launched several protests in Sana’a. After a short war that ended with Houthi 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 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 deteriorated progressively.  A Houthi offensive in Sana’a on January 19-20, 2015 resulted in the resignation of President Abd Rabbuh Mansour Hadi and his cabinet while under house arrest. Houthis subsequently announced the dissolution of the Yemeni Parliament and the creation of an 18-member Houthi-led “Revolutionary Committee” 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 tried taking steps to form a new interim government to run the country’s affairs from the southern city of 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 violence. There continues to remain a high threat of Al-Qaeda in the Arabian Peninsula (AQAP) or other emerging 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, led by Saudi Arabia and comprising members of the Gulf Cooperation Council, launched a military campaign in Yemen against al-Houthi rebels and allied forces loyal to former President Saleh.

Several peace mediations led by the United Nations and Oman have yet to secure a ceasefire agreement and a return to political dialogue. The ongoing violence and blockade have resulted in a humanitarian crisis with 20 million (or 80%) of Yemen’s 26 million population in need of humanitarian assistance. This represents a 33 per cent increase in needs since the conflict began.  The UN and aid organizations warn of an impending famine in Yemen.  The UN reported in June 2015 that 13 million Yemenis are food insecure and that millions more have no access to health and water.  According to UNOCHA, due to insecurity and the closure of more than 3,500 schools since the escalation of the conflict, 2 million children have been deprived of education.  The civil war has destroyed the country’s infrastructure and services, exacerbated social and economic hardships. As of mid-August 2015, the World Health Organization (WHO) had reported 28,022 casualties since March, including 4,513 deaths, among them a vast number of civilians. Since March, more than 1.4 million people have been internally displaced.  Imports have ceased resulting in persistent shortages in food, fuel and medicine. 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.

The difficult political and security situation in Yemen continues to weigh heavily on economic activity and Yemen’s economic recovery is highly vulnerable. GDP growth slowed significantly to about 0.3% in 2014 from 4.8% in 2013, as oil production was constrained by recurrent infrastructure sabotage and as severe fuel shortages and widespread power cuts seriously disrupted economic activity, as did the Houthi military advance. The current war is devastating the economy. Although quality data on national accounts is scarce, we expect oil production to fall by 60-70% over the year—it is now nearly completely suspended. In terms of the non-oil economy, the impact of reduced government spending and changes in trade flows suggest 20- 30% non-oil contraction for 2015 the year as a whole—about twice the contraction seen during the 2011 Arab Spring protests. In addition to the direct impact of fighting, the shortage of fuel and electricity is having a serious short-term impact on every aspect of the economy. Overall, we estimate a 25-35% contraction in real GDP in 2015. If peace is recovered next year, there will be a natural rebound as internal and external trade flows revive and expenditure from the government and aid agencies injects cash into the economy. Nevertheless, the recovery is likely to slow, and constantly undermined by political instability and violence.

Last Updated: Sep 30, 2015

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 ensure appropriate supervision and fiduciary oversight.

Prior to the recent escalation, the World Bank Group’s Interim Strategy Note for FY12-14 focused on protecting the poor by creating short-term jobs, restoring basic services, improving access to social safety nets, and revitalizing livelihoods. The program also aimed to promote growth and improve economic management, as well as improve governance and local services by supporting transparency, accountability, and citizen engagement in the mid-term.

Yemen is eligible for assistance and funding from the International Development Association (IDA), which provides grants and highly concessional loans to some of the world’s poorest countries. As of August 31, 2015 the Bank’s active portfolio consisted of 24 projects (including six recipient-executed trust funds) with total net commitments of about US$965 million, focused on increasing access to basic social services, improving infrastructure, and enhancing governance and institutions.

IDA support to Yemen was instrumental during the IDA16 period in scaling-up our partnerships with the Arab Coordination Group and other bilateral partners on projects where we brought complementary skills, knowledge, and relationships to the table, such as the Corridor Highway, Mocha Wind Park, and the Social Fund for Development and Labor Intensive Public Works. The Bank has collaborated with the UN in health and education.  World Bank teams also helped Yemen access additional funding from non-IDA resources, including the Deauville Partnership Transition Fund, the Pilot Program for Climate Resilience, and the Global Agriculture and Food Security Program (GAFSP).

Most recently, as part of the Bank’s FY15 deliverables, a US$118.5 million Emergency Support to Social Protection Project was approved in order to alleviate hardship for the poorest, in addition to the two Additional Financing Projects for the Social Fund for Development (US$50 million) and Labor Intensive Public Works (US$50 million) to create short-term income opportunities and increase access to basic social services and basic infrastructure.

Going forward, the strategy of the Bank will need to focus on helping Yemen prepare to recover from the conflict and its severe economic and social consequences.    Currently, we are focusing on economic work, including finalizing a CEM, poverty analysis and work in the energy sector. The Bank has also, together with other partners, embarked –even while the conflict is still ongoing- on a dynamic damage and needs assessment, to accelerate preparation of a full post conflict recovery program when the time comes.   The Bank will continue to work closely with all other partners in this upcoming difficult period.

Basic Education Development Project (closed December 2012): The project funded the construction of new classrooms and the rehabilitation of existing classrooms in 10 governorates, contributing to an 11.3% increase in student enrollment in those governorates between 2005 and 2010. The project supported about 5,000 Parents’ Councils, the recruiting and training of about 500 female teachers for work in rural areas, and the provision of conditional cash transfers to benefit about 35,000 girls. Criteria for cash transfers include family income and girls’ school attendance and performance. Overall, by the project closing date on December 31, 2012 girls’ enrollment had increased by 17.5% and the Gender Parity Index improved from 0.7 to 0.77 in the 10 governorates targeted by the project.

Social Fund for Development:  Until 2014, the Social Fund for Development (SFD) program had created 24 million working days (which includes Labor Intensive Works and Community and Local Development Programs) and the number of direct beneficiaries has reached about 4.5 million (2.5 million female and 2 million male). These beneficiaries include: 95,699 boys, 75,821 girls and 4,811 children with special needs benefiting from basic schools built through the program; 63,754 households benefiting from improved water sources; and 106,924 people (58 percent female) benefiting through SFD supported microfinance programs.

Public Works Project: Before the suspension of disbursements in March 2015, over 3,900 sub-projects in the education, health, roads, agriculture, vocational training, social security, water and sanitation sectors have been delivered to over 14.7 million poor people. More than 74 months of job opportunities have been created, including work for 1,900 local contractors and 1,250 local consultants.

Rural Access Project: As of December 2014, over 400,000 people have gained reliable year-round access to centers of economic activity and public services.

Health and Population Project: Two polio immunization campaigns totaling US$1.75 million have vaccinated 4.3 million children (under 5 years old) in 21 governorates. The Bank has also supported routine, integrated outreach sessions to provide immunization, mother and child health, and nutrition and disease control services, as well as health education to communities with no access to fixed medical facilities.

Schistosomiasis Control: Through this project, 9.6 million people have been treated against a urinary and intestinal parasite, also known as bilharzia, of which 5.4 million were school-aged children.

Yemen Mutual Accountability Framework (YMAF): A 3-year Yemen MAF became the framework that governed the relationship between the government and donors and defined government priority reforms in return for donor aid.  The Bank led the YMAF government-donor policy dialogue and coordination and assisted the government in mobilizing over US$7 billion in support of the country’s economic transition.   

Last Updated: Sep 16, 2015