Yemen's economy: one rial, two exchange rates and no oil exports

Why one currency trades at two prices

The Central Bank of Yemen was formed in 1990 by merging the central banks of the two Yemens, and the southern dinar was withdrawn from circulation on 11 June 1996, leaving the rial as the single currency. The war divided the bank again. Since 2016, Freedom House records, there has been a government-backed central bank in Aden and a Houthi-backed one in Sanaa, and the split has disrupted public-sector salaries and the flow of aid.

The two banks treat the same notes differently. The Aden bank issued 500 and 1,000 rial notes of new dimensions in 2017; in the Houthi-held north, notes printed after 2017 are not accepted as legal tender, and the old ones circulate at a steadier rate. The Council on Foreign Relations dates the splintering of the economy into two broad zones to late 2019. By January 2025 a dollar traded at about 2,150 rials in areas under the Presidential Leadership Council and about 530 in Houthi-controlled areas, according to the Yemeni rial article.

Each side contests the other's money. In 2025 the Sanaa authorities issued a 200 rial note bearing the name Central Bank of Yemen, which the recognised government called counterfeit currency from an "illegal terrorist entity"; the Aden bank had described an earlier Houthi 100 rial coin as a "dangerous escalation". In July 2024 the Aden bank revoked the licences of six Sanaa-based financial institutions, cutting them off from international banking, and reversed the move under a UN-brokered agreement later that month. The World Bank reports that the rial in Aden appreciated sharply in August 2025 and then stabilised, helped by central bank measures and Saudi financial support.

How the two Yemens merged their economies

The two states that united in 1990 brought different economies and the same weaknesses. In the north, the civil war of 1962 to 1970 and repeated droughts damaged what had been a prosperous farm sector, and coffee, the principal source of foreign exchange, declined as khat spread. With little industry and few raw materials, the Yemen Arab Republic imported most of what it used, and the Soviet Union and China funded roads, scholarships and military assistance from the mid-1950s.

In the south, economic life had been concentrated in the port of Aden, and its transit trade collapsed when the Suez Canal closed and Britain withdrew in 1967. Soviet aid, remittances from southerners working abroad and the revenue of the Aden refinery kept the People's Democratic Republic's planned economy going, and when Soviet aid stopped the southern economy collapsed, the Economy of Yemen article records.

Trade figures show how lopsided the arrangement was. At the height of the boom of the 1970s and 1980s, Britannica writes, Yemeni exports of coffee, cotton goods, hides and skins were worth a minute fraction of imports of food, manufactured goods, machinery, vehicles and fuel. Only oil, from the late 1980s, changed the ratio. The new republic then lost much of its outside income in a single year: about 850,000 Yemenis returned from the Gulf states in 1990, and the aid that had come from them was cut.

What oil and gas paid for before the war

Oil came late and briefly. Hunt Oil found oil and gas in commercial quantity near Marib in 1984, and a Soviet state company found more in the south two years later, near where the borders of the two Yemens and Saudi Arabia met. The Masila field north of Mukalla was struck in 1991 and began exporting in 1993; its output reached 420,000 barrels a day in 1999. Britannica treats these finds in a shared border zone running from Marib to Shabwah as one of the two reasons unification became possible.

At its height the trade carried the state. The Economy of Yemen article gives oil income as 70 to 75% of government revenue and about 90% of exports, and petroleum as 92% of exports in 2004 and 87% in 2005; crude output averaged 413,300 barrels a day in 2005. A liquefied natural gas plant at Balhaf on the Arabian Sea coast, a $3.7 billion investment designed for about 6.7 million tonnes a year, began production in October 2009. The refinery at Little Aden, built by British Petroleum in the 1950s and nationalised in 1977, was one of only two modern industries that added to national income before the 1970s in Britannica's account, the other a cotton textile industry founded in the north in the last years of the imamate.

That income has gone. The World Bank's Yemen Economic Monitor for spring 2026 reports that oil exports were still blocked in 2025, and that revenues fell to 5.6% of GDP as external grants shrank.

How far the war has shrunk output

The Economy of Yemen article records that the economy contracted by 50% between the start of the war in March 2015 and October 2018. The World Bank's latest monitor, published on 21 May 2026 under the title "Pushing Against the Tide", finds that real GDP fell by a further 1.5% in 2025 and projects a contraction of 0.5% in 2026. Activity in every sector, it says, is held back by a difficult business environment, little access to finance and weak demand.

The state's ability to pay its own staff has suffered with it. Lower revenue forced spending cuts that reached salary payments in 2025, the monitor reports, and nearly three-quarters of the population is estimated to live below the poverty line. The renewed war has made it worse. The FAO's early warning service reported that no fuel was imported through the Red Sea ports in March 2026, and that farmers faced high prices for fertiliser and fuel amid a wider conflict in the Middle East that began in late February 2026. In September 2026 the Security Council reported at least 125,000 people displaced across Yemen since the start of that month, citing the UN humanitarian office.

The pressures are older than the war. Britannica describes a regime that by the 2000s had turned the state into a source of patronage for officers, sheikhs and businessmen, and a reform package agreed with the IMF and the World Bank in 1995 that stalled after its first steps. The World Bank cut its aid by a third over 2005 to 2008 for lack of reform, the Economy of Yemen article records, and unemployment was put at between 20 and 40%.

What the farms grow and what they cannot

More than half of Yemen's workforce is in agriculture, Britannica writes. The terraced highlands carry millet, maize, wheat, barley and sorghum, with tropical fruit on the lower ground and pears, peaches, apples and grapes higher up. Most farming families keep some chickens, goats, sheep or cattle, though Yemen still imports much of its livestock, dairy and poultry.

Two cash crops share the middle highlands, at about 1,400 to 2,000 metres. Coffee was for centuries the country's best-known export, shipped through Mocha between the 16th and 18th centuries until plantations elsewhere undercut it. Khat, an evergreen shrub whose young leaves are chewed as a mild stimulant, has been displacing it: old coffee terraces are converted to khat as their yields fall, and new khat is planted on land once thought too poor for commercial farming. The Central Bank of Yemen put khat at 5.8% of GDP in 2005, when its output rose 6.7%. Cotton, promoted on the Tihamah and east of Aden from the 1970s, stopped being competitive at the end of the 20th century.

Why the country imports most of its grain

Water limits what the land can feed. Agriculture draws heavily on groundwater that is not being replaced, and as irrigated fruit and vegetables became the main cash crops, the output of rain-fed cereals declined. The result shows in the FAO's figures: cereal production in 2025 was estimated at a below-average 400,000 tonnes after a dry, hot season, and the import requirement for 2026 was forecast at 5.2 million tonnes. Food imports through the Red Sea held up early in 2026, with first-quarter volumes about 28% above the same period of 2025, mostly commercial wheat for bread. The 2026 season itself started reasonably: the FAO reported in June 2026 that winter wheat on the eastern plateau had been harvested in April, that above-average March rain pointed to near-average yields in the northern and central highlands, and that the main rain-fed sorghum crop had been planted in most of the highlands, though below-average rain was forecast for parts of the southern uplands and the north.

Where fish and ports fit in

The three seas around Yemen give it a fishery that the Economy of Yemen article estimates could land 840,000 tonnes a year. It is worked mostly by individual fishermen in small boats. After export restrictions were lifted it reached a quarter of that capacity, earning about US$260 million in 2005, when fish were the second export after oil. Foreign assistance, notably from the Soviet Union, helped build the industry, Britannica notes, and the World Bank lent US$25 million in December 2005 for landing sites, auction halls and ice plants along the Red Sea and the Gulf of Aden.

Trade runs through two ports. Until the early 1960s about three-quarters of North Yemen's trade passed through Aden; after the 1962 revolution the new republic redirected it to Hodeidah on the Red Sea, which the Soviet Union helped to expand. Aden gained an industrial free zone in 1991 and a container port in 1999. Britannica names China and Saudi Arabia as Yemen's main trading partners and Turkey as another major source of imports; besides crude oil, Yemen exports gold and foodstuffs to its neighbours.

How aid and remittances keep households fed

Money from outside has paid for Yemen's trade deficits for decades. Remittances from Yemenis working abroad and foreign aid filled the gap, and Yemeni communities live across the Arabian Peninsula and in India, Indonesia, East Africa, Britain and the United States; and when Saudi Arabia expelled Yemeni workers in 1990 the fall in remittances broke the government's budget. The World Bank still lists remittances, exports and aid as the country's main sources of income, and all three were weak in 2025.

Aid now carries much of the population. The World Bank's concessional arm has given more than US$3.9 billion in grants since re-engaging in 2016, much of it through UN agencies. The UN humanitarian office put the people in need at 22.3 million in 2026 and asked for US$2.16 billion to reach 12 million of them; by its own count the plan was 21.66% funded. The World Food Programme counts 18.3 million people facing acute food insecurity and an estimated 5.2 million internally displaced, and has suspended its work in areas under the Houthi authorities in line with a pause of all UN operations there, while continuing food and cash assistance in government-held areas.