Economists: New Saudi support for Yemeni government is an "emergency step" that requires a reform program to benefit from it

Economic experts confirmed that the new support announced by the Kingdom of Saudi Arabia to the Yemeni government, last Friday evening, represents an "important emergency step" for the deteriorating economy, stressing the need to implement a comprehensive reform program to benefit from it.

The Saudi government announced new support for the Yemeni government worth half a billion dollars, including $300 million as a new deposit to the central bank aimed at strengthening the local currency, and $200 million as a fourth payment to address the government’s general budget deficit, according to the official Saudi Press Agency (SPA).

According to the Saudi Press Agency, the economic support aims to "establish the foundations of economic, financial and monetary stability in the Republic of Yemen, enhance the public finance situation, develop and build the capacities of government institutions, and enhance their governance and transparency," in addition to "enabling the private sector to drive sustainable economic growth and create job opportunities, which will lead to putting the national economy on a more sustainable path and advancing the process of economic and social development."

President Al-Alimi, the Prime Minister, the Minister of Finance, and the Governor of the Central Bank welcomed the Saudi support, and stressed in separate statements that it will directly contribute to strengthening financial stability, paying the salaries of state employees, and stopping the deterioration of the national currency, which will ease the living burdens on citizens, support the path of economic recovery, and enable the government to continue with determination in the program of financial and administrative reform and combating corruption.

First aid step

Mustafa Nasr, head of the Center for Economic Studies and Media, considered the Saudi support an "important emergency step" for an authority that was on the verge of losing the foundations of its existence by going bankrupt, as he described it.

He explained in a post on his Facebook page that the Saudi support, which included the disbursement of the fourth installment of the state budget deficit support grant, came after months of hesitation due to the Saudi government’s awareness of the severe weakness in the balance of the legitimate leadership’s powers in the economic and financial reform program.

Nasr pointed out that the Saudi support came in response to the demands of the legitimate government, which requested to be rescued due to the increasing popular demands to deliver salaries, as the government has been unable to deliver salaries for the last three months, and is suffering from an unprecedented shortage of revenues, in addition to financial corruption in important economic sectors.

Comprehensive reforms

 For his part, the journalist specializing in economic affairs, Wafiq Saleh, stressed the need for the Yemeni government to commit to implementing a comprehensive reform program to benefit from this support.

He explained that this program must include: “developing and sustaining public resources, rationalizing expenditures, adhering to the principles of transparency and integrity, unifying revenue sources, in addition to halting all futile expenditures and expenses that accompanied the performance of government institutions.”

He pointed out in a post on his Facebook page that the announced Saudi support could currently constitute "a solid foundation that contributes to helping the government perform its duties and fulfill its financial obligations towards paying employees' salaries, securing the import of food and essential goods, and achieving relative stability in the exchange markets by calming speculation and curbing the demand for purchasing hard currency."

Saleh warned that without these reforms, the new grant would remain “a temporary solution, the effect of which would end once it is exhausted and disposed of, without achieving any economic impact.”

In light of the financial crisis that the Yemeni government is suffering from due to the halt in oil and gas exports, following the Houthi attacks that targeted the oil sectors and export platforms in October 2022, Saudi Arabia announced in August 2023 that it would provide support to the government in the amount of $1.2 billion to address the general budget deficit, of which $1 billion has been spent so far, in addition to $300 million new announced last night.

The Yemeni government announced, on Thursday, the approval of a government economic plan for urgent priorities, and the formation of a higher supervisory committee headed by the Prime Minister, to supervise the level of implementation of the plan, adding that it approved the formation of a technical committee from the relevant authorities to develop the appropriate mechanism and models for implementing the plans.

The halt in oil and gas exports has made it impossible for the government to pay salaries regularly and provide services to citizens, in addition to the further deterioration of the national currency, as the exchange rate reached 2,065 riyals to the dollar on Thursday.