This blog is an edited version of a speech by Bushra Nasr Kretschmer, head of the Economic Portfolio for the Women4Yemen Network, delivered at the Yemen Peace Conference in New York in March 2019.
There is a tragic and overwhelming humanitarian crisis taking place in Yemen. We have all seen the devastating images of starvation – made only more shocking by the fact that such a famine can occur in the 21st century. The famine, however, is a very real consequence of the conflict and the resulting economic decline in Yemen.
It is the women who bear the greatest economic burden in this war and they are the ones who know how to turn the war economy into peace-driven economy. Women are heading up households in increasing numbers and are, therefore, also responsible for the family finances. We need to harness the economic power of women to build a peace economy. Women in Yemen can show the war profiteers that peace can also build an economy. That is why it is unfortunate that women are now absent from both Yemeni political life and the peace talks.
Here’s a snapshot of the Yemeni economy since the conflict began:
- Yemen’s Gross Domestic Product (GDP) has decreased by 50 percent since the end of 2014.
- Essential Central Bank functions have been disrupted after the transfer of the Central Bank from Sanaa to Aden.
- Disruptions in economic activities have dramatically reduced employment and income opportunities.
- Remittances fell, partly due to restrictions imposed on money transfers, from $2 Billion annually in 2011 to $1.4 Billion in 2016.
- Oil and gas production and exports have come largely to a halt since 2015, running at about 10 to 15 percent of capacity.
- Imports have declined sharply as foreign reserves fell below US$250 million in 2016 and foreign debt obligations have not been serviced since May 2016.
- Salaries for about 400,000 civil servants have only been partially paid since September 2016.
- Inflation rose, from 215YR/USD in 2014 to 810 YR/USD as of September 2018.
- Yemen’s total public debt increased considerably in 2017. The public debt ratio stands at 75 percent of the GDP.
A World Bank report, “Securing Imports of Essential Food Commodities to Yemen”, concluded that:
- The major challenge to food security in Yemen is food demand not supply. This means that market mechanisms have, so far, been able to sustain the continued supply of food commodities and have, in fact, shown great resilience.
- Access to foreign currency is a key constraint for importers.
- It is difficult to withdrawal and transfer of bank funds.
- Rising political, macroeconomic and financial sector instability has led to drop in Foreign Exchange inflows in Yemen.
On the other hand, here is a snapshot of revenues, used to sustain the war, in Houthis-controlled areas:
- Customs from Al Hudadah port.
- Excessive taxes on the telecommunication, banks, and private sector, by enforcing 20% , and sometimes 30%, extra in tax.
- Double and triple customs imposed on all goods coming from the southern ports.
- The monopoly on oil derivatives that comes free from Iran.
- Speculating on the price of currencies.
- Speculating on UN Humanitarian Assistance Bank transfers as these transfers are not going through the Central Bank and, therefore, not subject to central control.
Clearly the economic situation of Yemen is extremely complicated, but here are some strategic insights.
With the new Prime Minister, Dr. Maeen Abudlmalik, we have seen some improvements to the Yemeni economic sector as the Prime Minister has moved to stabilize the currency and facilitate the issuance of a letter of credit for the private sector with a lower-than-market exchange rate. The Yemeni Rial has strengthened from 810 YR/USD to 560 YR/USD as February 2018. Pensions to 40,000 people, who live in Houthis-controlled areas, are now being paid. And it was recently announced that civil servants in Hodeida and civil servants working in the health sector are now receiving their salaries.
While these improvements are to be encouraged and welcomed, they are, of course, limited in nature and cannot, in and of themselves, lead to an improved overall economy for Yemen.
The Central Bank in Aden needs to be fully activated. The banking sector has to be revitalized as it is a pre-requisite to ridding Yemen of the black market. The international community and the United Nations need to support Yemen in having a strong, state-controlled Central Bank. Bank sovereignty is needed in order to establish to peace.
On February 26, 2019, donors pledged US$2.6 billion to ensure humanitarian operations in Yemen are sustained and scaled up. Unfortunately, it is estimated that 70 percent of these funds will go to operational costs and that 60 percent of humanitarian aid is being confiscated by the Houthi.
So, the questions we have to ask ourselves are: What funds are actually available? And can that money actually help end the humanitarian crisis?
Let me answer those questions by giving you an example: Somalia, since 1991, has received over $55 billion in aid, making it the top aid recipient. These funds, unfortunately, did not help Somalia’s economy, rather the funds helped to deepen corruption, weaken the economy and fuel conflict. And Yemen is, tragically, on track to follow this example.
The complete dependence on relief and donations is not the strategic economic approach needed to lift Yemenis from the current crisis.
Here’s another example: The World Bank, in partnership with Social Fund for Development and Small and Micro Enterprise Promotion Service (SMEPS) showed that even in conflict situations, sustainable work can be done to build an economy. For the past four years in Yemen, income-generating and development activities were directed towards education, health, fishery, water, hygiene, and sanitation (WASH) and agriculture. In 2017, SMEPS contributed to peace and food security by providing economic growth in agriculture by upgrading farming skills – providing farmers with new skills and technologies to survive conflict. Support was given to 1782 farmers and these farmers, in turn, provided short-term and long-term job opportunities for 22,000 people. Forty percent of these farm workers were fighters leaving combat on the front lines.
Another project saw 500 midwives and nurses re-employed to provide lifesaving health services for more than 110,000 people in the fight against cholera.
These projects were mainly led by women. And this is what an economy that builds peace looks like.
An economy based on war, monopoly and corruption is not in the best interest of the Yemeni people as only serves to deepen the humanitarian crisis.
There are concrete actions that can be taken to build a peace economy:
- Currently, UN Humanitarian Assistance Bank transfers are not processed through the Central Bank. In order to bring foreign currency into the money cycle and improve the value of the Yemeni Rial, UN and other the International Organizations should direct all transfers via the Central Bank in Aden. This simple change in practice would help the economy and improve humanitarian conditions.
- UN and allies should ensure that all oil importers import via the banking system supervised by the Aden Central Bank.
- Humanitarian aid should not be imported, but instead bought locally to improve the local economy and boost employment. Humanitarian aid should be given in vouchers used to buy goods from local retailers.
- The coalition should accelerate the security clearance for ships so that International Organizations can deliver goods to Yemeni ports on an expedited basis.
- Sea ports in Aden, run by the coalition, are not fully-functioning nor are they running at capacity. The efficient functioning of Aden porst would, significantly, help to the lessen the humanitarian crisis.
- The re-building and the reconstruction of the country, from the damage to infrastructure sustain in the war, needs to start now.
- The war economy is being propped up by both local and global profiteers. Inside Yemen, the black market is flourishing and, globally, weapons are being sold to combatants and oil production manipulated so that foreign states can profit from this war.
A stable and secure economy is not just good for Yemen, but it should be of interest locally, regionally, and internationally. Yemen’s economic stability should be a uniting factor for regional security and it is necessary in order to build a just and sustainable peace. To build that peace, women need to be involved in the peace process. Women must be central to both building a peace-driven economy and to building peace in Yemen.