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Aug - 15 - 2026 Download The Version
July 2026 witnessed fragile economic stability at the domestic level and relative progress in international financing and reform efforts, while maritime conditions and shipping and insurance costs deteriorated to dangerous levels amid Houthi attacks on Saudi-linked vessels in the Red Sea and the Arabian Sea. The overall landscape was therefore shaped by three main trends: an important window for international financing and support; a maritime military escalation that overshadowed its impact and imposed additional costs on trade and prices; and an internal governance crisis that weakened the Yemen’s IRG ability to capitalize on available opportunities. As a result, the Yemeni economy ended the month in a state of fragile stability, with seemingly stable monetary indicators but a high cost of living for citizens. The Yemeni Rial remained relatively stable in IRG-controlled areas, with the average US dollar exchange rate in Aden reaching approximately YER 1,562. However, this stability did not translate into improved living conditions for citizens. The economy continued to absorb successive cost shocks originating from the maritime sector: war-risk insurance premiums for shipping surged from around 0.3% to more than 1% following attacks on Saudi oil tankers, in addition to internal levies imposed by the Houthi group, most notably increased fees on flour coming from Aden. All of this has had a direct impact on food and fuel prices. This has coincided with a state of paralysis in IRG activity, as it faces severe difficulties in covering operational expenditures due to a structural revenue crisis, primarily stemming from the loss of its main sovereign revenue source following the suspension of oil exports in late 2022. The resulting losses have been estimated by Yemen’s Ambassador to Washington at approximately $6 billion. This is compounded by a clear institutional crisis concerning the effectiveness of IRG performance and the incomplete implementation of reforms related to local revenues and mechanisms for sharing them between governorates and the central government in Aden. This dual crisis, missing revenues and faltering administration, is what makes every financing or reform opportunity contingent on a consensual political decision that has become increasingly difficult to achieve. On the domestic front, the fragile semblance of cohesion among members of the Presidential Leadership Council (PLC) weakened against the backdrop of partial cabinet reshuffle decisions, some of which were reversed within days on the grounds of a lack of consensus. This was followed by the resignation of Minister of Local Administration Badr Basalma, who described his resignation as a “wake-up call.” The tensions came close to undoing months of efforts to mend divisions among the PLC’s components following the confrontation with the Southern Transitional Council (STC) in Hadramout last December. Resumption of Oil Exports Announced Despite President of the PLC Dr. Rashad Al-Alimi’s announcement on July 20 that oil exports would resume “by all means” and that the revenues would be allocated to salaries and public services, military developments dominated the scene and pushed an event of such significance out of the spotlight. The announcement, which had not yet been implemented and for which no shipment had been documented as having sailed by the end of the month, came within a political context aimed at putting the Houthi group under pressure and reminding the public of its responsibility for depriving Yemenis of their most important sovereign revenue source since 2022, particularly after it adopted the slogan “blockade for blockade” as part of its proxy confrontation with Saudi Arabia. According to the Minister of Oil, the IRG has more than 1.7 million barrels of oil ready for export, while sources close to the SEMC indicate that the stockpile exceeds two million barrels. Negotiations are underway to establish export arrangements. However, three constraints stand between the announcement and its implementation: the possibility of Houthi attacks on export ports or tankers, which remains a plausible and anticipated risk; exceptionally high insurance and shipping costs under the current blockade environment; and the need for an internal settlement over revenue-sharing, following the insistence of the Hadramout local authority on a 20% share of the crude produced and exported. The paradox is that the rise in Brent crude prices above $100 per barrel increases the value of every potential shipment, while the same escalation that drove prices higher threatens the safe passage of those shipments. IRG measures coincided with the opening of an important window for international financing and support for the reform process. The World Bank approved the “Cash for Nutrition and Livelihoods” project, with total financing of $101.8 million targeting approximately 1.8 million beneficiaries across 15 governorates. The IRG also reached a staff-level agreement with the International Monetary Fund (IMF) mission in Amman on a Memorandum of Economic and Financial Policies and a Technical Memorandum of Understanding, paving the way for a Staff-Monitored Program (SMP). The significance of the program lies in advancing reforms to a deeper level and strengthening the confidence of international stakeholders in the government, serving as a “credibility certificate” that could open the door to greater support from donors. In areas under Houthi control, public anger intensified as part of an unprecedented community movement under the slogan “I Am Hungry,” reflecting the deterioration of living conditions amid the suspension of salaries and the absence of basic services. The movement was met with repression and the targeting of participants, forcing some content creators to leave the country. Rather than addressing the underlying causes of the crisis, the Houthi group intensified levies on essential commodities coming from IRG-controlled areas, particularly flour, and introduced a new system of fees on cigarettes under the pretext of supporting salary payments. At the same time, the activity of banks and money exchange companies in those areas has declined significantly, accompanied by an ongoing outflow of domestic capital and an increasing shift of investments toward Saudi Arabia.
July 2026 witnessed fragile economic stability at the domestic level and relative progress in international financing and reform efforts, while maritime conditions and shipping and insurance costs deteriorated to dangerous levels amid Houthi attacks on Saudi-linked vessels in the Red Sea and the Arabian Sea. The overall landscape was therefore shaped by three main trends: an important window for international financing and support; a maritime military escalation that overshadowed its impact and imposed additional costs on trade and prices; and an internal governance crisis that weakened the Yemen’s IRG ability to capitalize on available opportunities. As a result, the Yemeni economy ended the month in a state of fragile stability, with seemingly stable monetary indicators but a high cost of living for citizens.
The Yemeni Rial remained relatively stable in IRG-controlled areas, with the average US dollar exchange rate in Aden reaching approximately YER 1,562. However, this stability did not translate into improved living conditions for citizens. The economy continued to absorb successive cost shocks originating from the maritime sector: war-risk insurance premiums for shipping surged from around 0.3% to more than 1% following attacks on Saudi oil tankers, in addition to internal levies imposed by the Houthi group, most notably increased fees on flour coming from Aden. All of this has had a direct impact on food and fuel prices.
This has coincided with a state of paralysis in IRG activity, as it faces severe difficulties in covering operational expenditures due to a structural revenue crisis, primarily stemming from the loss of its main sovereign revenue source following the suspension of oil exports in late 2022. The resulting losses have been estimated by Yemen’s Ambassador to Washington at approximately $6 billion. This is compounded by a clear institutional crisis concerning the effectiveness of IRG performance and the incomplete implementation of reforms related to local revenues and mechanisms for sharing them between governorates and the central government in Aden. This dual crisis, missing revenues and faltering administration, is what makes every financing or reform opportunity contingent on a consensual political decision that has become increasingly difficult to achieve.
On the domestic front, the fragile semblance of cohesion among members of the Presidential Leadership Council (PLC) weakened against the backdrop of partial cabinet reshuffle decisions, some of which were reversed within days on the grounds of a lack of consensus. This was followed by the resignation of Minister of Local Administration Badr Basalma, who described his resignation as a “wake-up call.” The tensions came close to undoing months of efforts to mend divisions among the PLC’s components following the confrontation with the Southern Transitional Council (STC) in Hadramout last December.
Resumption of Oil Exports Announced
Despite President of the PLC Dr. Rashad Al-Alimi’s announcement on July 20 that oil exports would resume “by all means” and that the revenues would be allocated to salaries and public services, military developments dominated the scene and pushed an event of such significance out of the spotlight. The announcement, which had not yet been implemented and for which no shipment had been documented as having sailed by the end of the month, came within a political context aimed at putting the Houthi group under pressure and reminding the public of its responsibility for depriving Yemenis of their most important sovereign revenue source since 2022, particularly after it adopted the slogan “blockade for blockade” as part of its proxy confrontation with Saudi Arabia.
According to the Minister of Oil, the IRG has more than 1.7 million barrels of oil ready for export, while sources close to the SEMC indicate that the stockpile exceeds two million barrels. Negotiations are underway to establish export arrangements. However, three constraints stand between the announcement and its implementation: the possibility of Houthi attacks on export ports or tankers, which remains a plausible and anticipated risk; exceptionally high insurance and shipping costs under the current blockade environment; and the need for an internal settlement over revenue-sharing, following the insistence of the Hadramout local authority on a 20% share of the crude produced and exported.
The paradox is that the rise in Brent crude prices above $100 per barrel increases the value of every potential shipment, while the same escalation that drove prices higher threatens the safe passage of those shipments.
IRG measures coincided with the opening of an important window for international financing and support for the reform process. The World Bank approved the “Cash for Nutrition and Livelihoods” project, with total financing of $101.8 million targeting approximately 1.8 million beneficiaries across 15 governorates. The IRG also reached a staff-level agreement with the International Monetary Fund (IMF) mission in Amman on a Memorandum of Economic and Financial Policies and a Technical Memorandum of Understanding, paving the way for a Staff-Monitored Program (SMP). The significance of the program lies in advancing reforms to a deeper level and strengthening the confidence of international stakeholders in the government, serving as a “credibility certificate” that could open the door to greater support from donors.
In areas under Houthi control, public anger intensified as part of an unprecedented community movement under the slogan “I Am Hungry,” reflecting the deterioration of living conditions amid the suspension of salaries and the absence of basic services. The movement was met with repression and the targeting of participants, forcing some content creators to leave the country.
Rather than addressing the underlying causes of the crisis, the Houthi group intensified levies on essential commodities coming from IRG-controlled areas, particularly flour, and introduced a new system of fees on cigarettes under the pretext of supporting salary payments. At the same time, the activity of banks and money exchange companies in those areas has declined significantly, accompanied by an ongoing outflow of domestic capital and an increasing shift of investments toward Saudi Arabia.