The Golden Thread: The cost of producing a kilowatt of electricity in Yemen reaches 150 riyals, but citizens pay only 9 riyals. This fact is the core of the deal the Yemeni government is seeking to achieve: a one billion dollar loan from the International Monetary Fund in exchange for gradually lifting this subsidy.

These economic and structural reforms tied to the loan raise a pivotal question: will they save an economy suffering from a severe financial crisis and halted oil exports, or will they increase the burden on citizens in a country where millions live below the poverty line?

The comprehensive electricity subsidy, costing over one billion dollars annually, has become an unbearable burden amid declining public revenues and a widening fiscal deficit. The proposed reforms also include liberalizing the customs dollar exchange rate and expanding the role of the private sector in managing some facilities.

However, the fundamental problem is that Yemen is not experiencing normal economic conditions. The state itself faces difficulties in paying salaries and securing basic services, meaning any increase in electricity and energy prices will directly lead to higher transportation and production costs, as well as prices for goods and services, thereby increasing living burdens in the short term.

  • The crisis is not limited to subsidies. The halt of oil exports since late 2022, which was the main source of revenue, plays a key role, along with weak tax and customs collection, deteriorating infrastructure, and institutional division.
  • The success of any reform program depends on the state’s ability to convince citizens that the burdens they will bear will lead to better services and greater economic stability.
  • Loans are not a permanent solution but provide a limited time window for deeper reforms. If this opportunity is not invested in revitalizing the economy and restoring sovereign resources, the loan itself could become an additional burden worsening the public debt problem.

Yemen needs genuine economic reforms, and continuing subsidies in their current form is no longer sustainable. But the real challenge is achieving a delicate balance between the requirements of economic stability and the necessities of social justice. This balance will determine whether the billion dollar loan is the start of the path to recovery or just another stop on the long journey in search of stability.

Yemen

Yemen, located on the southern tip of the Arabian Peninsula, is one of the oldest centers of civilization in the Middle East, with a history dating back to the ancient kingdoms of Saba (Sheba), Hadhramaut, and Himyar. Known for its unique architecture, such as the mud-brick skyscrapers of Shibam and the historic old city of Sana’a, Yemen has long been a crossroads of trade and culture. However, in recent decades, the country has faced devastating civil war and humanitarian crisis, which have severely damaged its rich cultural heritage.

International Monetary Fund

The International Monetary Fund (IMF) is a global financial institution headquartered in Washington, D.C., created in 1944 at the Bretton Woods Conference to promote international monetary cooperation and financial stability. It provides loans, policy advice, and technical assistance to member countries facing balance of payments crises, while also monitoring global economic trends. Over time, the IMF has evolved to address challenges such as debt crises and economic development, though it has faced criticism for its often stringent loan conditions.