IMF Concludes First Article IV Review of Yemen in Over a Decade

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The IMF has concluded its first Article IV consultation with Yemen in over a decade, in a development regarded as significant for the country’s efforts to rebuild its relationship with the international financial community amid its economic turmoil. The approval of the results of the consultation, following an eleven-year hiatus, reflects a renewed engagement with the country after a prolonged interruption.

Yemen has been embroiled in conflict since 2015, a war that has produced one of the world’s worst humanitarian crises and devastated the economy. The disruption of production, the loss of revenues and the depreciation of the currency have deepened the country’s economic difficulties, and the resumption of the consultation comes against this challenging backdrop.

Article IV consultations are a regular element of the International Monetary Fund’s engagement with member countries, involving an assessment of a country’s economy and its policies. The conclusion of such a consultation with Yemen, after an interruption of eleven years, marks a notable step in the country’s re-engagement with the Fund.

The eleven-year hiatus in consultations reflected the disruption of Yemen’s engagement with the international financial community amid the conflict and the difficulties preceding it. The resumption of the consultation therefore represents a resumption of a form of engagement that had lapsed, reflecting a renewed interaction between Yemen and the Fund.

The suspension of oil exports, once a primary source of revenue, has been among the most damaging economic consequences of the conflict. Exports were halted following attacks on oil facilities, depriving the government of a principal source of income and deepening the fiscal pressures facing the state, a factor central to the country’s economic difficulties.

The loss of oil revenue has had profound implications for Yemen’s public finances. The government’s reliance on these exports left it exposed to their disruption, and the resulting loss of income has complicated its efforts to sustain services, pay salaries and manage the economy, contributing to the broader economic crisis.

The IMF’s decision to resume consultations reflects an assessment of Yemen’s institutional capacity and its ability to produce the data and engage in the dialogue that such consultations require. The resumption suggests a degree of confidence in the country’s capacities, reflecting cautious optimism regarding its engagement with the Fund.

The conclusion of the consultation carries significance for Yemen’s standing with the international financial community. Engagement with the IMF is an element of a country’s relationship with the international monetary system, and the resumption of consultations reflects a re-engagement that could influence the country’s access to support and its standing with other institutions.

The Article IV process typically involves an assessment of a country’s economic situation and policies, along with recommendations. Such assessments can inform the country’s own policymaking and its engagement with partners, and the conclusion of the consultation with Yemen reflects a renewed dialogue on the country’s economy and its challenges.

The economic challenges facing Yemen, encompassing the loss of revenues, the devaluation of the currency and widespread poverty, are formidable. The engagement of the IMF could support efforts to address these challenges, contributing to the broader agenda of stabilisation and reform that the country’s recovery requires.

The role of data production and institutional capacity, cited in relation to the resumption, reflects the requirements of engagement with the Fund. The ability to produce reliable economic data and to engage in the consultation process is important to the relationship, and the resumption suggests progress in these areas despite the challenges.

The re-engagement of the IMF, marked by the conclusion of the consultation, forms part of Yemen’s broader efforts to rebuild its relationships with the international community. As the country contends with its economic crisis, its engagement with international institutions is central to its efforts, and the resumption of consultations represents a notable element of this.

The significance of the development lies in part in its potential to support Yemen’s economic prospects. Engagement with the IMF could contribute to efforts to stabilise the economy, to advance reform and to strengthen the country’s standing, though the realisation of such benefits will depend on subsequent steps and on the broader situation.

The challenges facing Yemen’s economy are unlikely to ease quickly, given the persistence of the conflict and the suspension of key revenue sources such as oil exports. Addressing them will require sustained effort, reform and support, and the engagement of the IMF represents one element of the broader effort toward economic recovery.

The conclusion of the consultation after such a prolonged interruption reflects a step in the normalisation of Yemen’s engagement with the international financial community. While the challenges remain immense, the resumption of a regular form of engagement represents a modest but meaningful development in the country’s economic relationships.

The halting of oil exports since 2022 casts a particularly long shadow over any assessment of Yemen’s finances, and it is likely to have featured prominently in the consultation’s findings. Before the disruption, revenue from crude sales underwrote a substantial portion of the government’s budget; its abrupt loss has forced a heavy reliance on external grants and left the state perennially short of the means to meet its obligations. Any credible path back to fiscal stability, economists note, runs through the eventual resumption of exports, making the security of the country’s oil infrastructure and export terminals an economic question as much as a military one.

For now, the IMF’s conclusion of its first Article IV consultation with Yemen in over a decade marks a significant step in the country’s re-engagement with the international financial community. As Yemen grapples with the loss of revenues, currency devaluation and poverty, the resumption of such engagement represents a potential milestone in its efforts toward economic stability and recovery.