Widening Deficit and Halted Exports: Is the Government Nearing Bankruptcy?
NYN | Reports and Analyses
A severe financial crisis is threatening Yemen’s internationally recognized government as the revenue gap widens and domestic resources decline sharply.
The government is facing one of its most complex financial crises in years, amid an expanding disparity between revenues and public expenditures, and an unprecedented drop in local income.
Economic experts warn that the continued weakness in customs and tax collection, along with fragmented public income sources, signals a deeper collapse in the government’s ability to meet its financial obligations—particularly in paying public sector salaries and funding essential services in the areas under its control.
One economic advisor explained that “the absence of effective mechanisms for financial oversight and revenue collection, combined with administrative corruption and job duplication, has led to a near-paralysis in government cash flow,” noting that a significant portion of revenues never reaches the public treasury and instead gets diverted across various entities.
Under these conditions, economists believe that floating the customs exchange rate of the dollar is now a serious option for the government—an unpopular but necessary step in financial reform aimed at reducing the budget deficit and ensuring the regular payment of salaries.
However, experts caution that such a move carries serious inflationary risks that could impact the prices of essential goods and raise the cost of living.
Financial analysts argue that the current crisis goes beyond a simple cash deficit; it reflects a structural failure in public resource management. Successive government policies have failed to build a stable financial system or create sustainable economic alternatives, especially after the suspension—and illicit diversion—of oil exports in favor of powerful individuals.
In contrast, several experts have called for comprehensive reforms, including anti-corruption efforts, tighter controls over customs and tax outlets, and an expansion of non-oil revenue sources by supporting productive sectors such as agriculture, fishing, and telecommunications.
They also stressed the need to enhance financial transparency and restructure public spending to ensure resources are directed toward citizens’ priorities.
Observers believe the future of financial stability in areas controlled by the internationally recognized government will largely depend on its ability to regain control over sovereign resources, revive oil and gas exports, and convince international donors to resume financial support.
