Saudi Gazette report

RIYADH — Saudi Arabia has deposited $250 million out of a total economic aid of $1.2 billion with the legitimate Yemeni government to boost the country’s struggling economy. This is in line with the directives of Custodian of the Two Holy Mosques King Salman and Crown Prince and Prime Minister Mohammed bin Salman.

The economic aid is also based on further bolstering the bonds of brotherhood and strong ties between the Kingdom and Yemen in terms of offsetting the budget deficit and to support salaries, wages, operating and security expenses as well as in support of the economic reforms being undertaken by the Yemeni government.

The economic support comes as an affirmation of the Kingdom’s keenness to achieve security, stability, and development for the Yemeni people, and as a contribution to strengthening the Yemeni government’s budget, raising the purchasing power of the Yemeni citizens, and supporting economic recovery of Yemen.

It is noteworthy that the Kingdom has been exerting relentless efforts to support and strengthen the Yemeni economy and improve the livelihood of the Yemeni people. In August 2023, the Kingdom announced the provision of economic aid to Yemen worth $1.2 billion in response to the request of the Yemeni government to help it address its budget deficit, support salaries, wages and operating expenses, and support ensuring food security, bringing the Kingdom’s total direct economic and development support, amounted to about $11.2 billion during the period between 2012 and 2023.

The most prominent economic impacts of this economic aid include supporting the budget deficit, improving the stability of the Yemeni citizen’s living conditions, building the capabilities of the Yemeni government, implementing the economic reforms program, and strengthening the capabilities of the Central Bank of Yemen by activating monetary policy tools.

It is noteworthy that during the year 2012, the Kingdom provided $1 billion and in 2018, an amount of $2 billion was deposited in the account of the Central Bank of Yemen as a deposit to cover the import of basic food commodities such as wheat grains, wheat flour, rice, milk, cooking oil, and sugar, which contributed to the improvement of the human development index. This helped enhancing the Central Bank’s foreign currency reserves, reducing the currency collapse to a relative extent, lowering fuel and diesel prices, as well as improving the standard of living, and increasing GDP growth during the year 2019.

The previous Saudi deposit contributed to reducing fuel and diesel prices by about 36 percent during the year 2019, and reducing the average cost of the lowest food basket by about 16 percent in 2018 and then maintaining its stability until the end of 2019, as well as a decrease in the prices of imported food commodities by about 19 percent after reaching their peak in October 2018. Consequently, the real GDP growth rate during the years 2018 - 2019 witnessed an increase of about 0.75 percent for the year 2018 and 1.4 percent for the year 2019, according to the International Monetary Fund’s estimates for the year 2022.

It also contributed to the increase in foreign exchange reserves in the Central Bank of Yemen from $900 million in 2017 to $2.5 billion in 2018, the increase in total food imports in 2019 by about 17 percent compared to 2018, and the decline in exchange rates in 2018 by about 25 percent. During the year 2019, the Central Bank of Yemen succeeded in stabilizing the exchange rate of the Yemeni riyal at approximately SR500/US dollar.

While the integrated support provided by Saudi Arabia contributed to achieving part of the economic efficiency and strengthening the financial and economic situation in Yemen, especially the exchange rate of the Yemeni riyal, and this reflected positively on the living conditions of Yemeni citizens with the stability of the prices of food commodities, and limiting the deterioration of purchasing power, reducing the inflation rate and raising spending rates contributed to the improvement of the Yemeni economy in the last quarter of 2018 until the end of 2019.

The Kingdom also played an important role in stimulating Yemen’s economic growth by providing grants from oil derivatives, allocated to generating electricity for all governorates of the country. These grants aimed to stimulate the Yemeni economy and raise the efficiency of the vital, productive and service sectors. In 2021-2022, the total amount of support from oil derivatives reached about 1,260,850 metric tons to operate more than 70 Yemeni stations, with a value of $422 million, distributed according to the need that was monitored and studied in various Yemeni governorates.

The total quantities of fuel supplied to the petroleum derivatives grant contributed to alleviating the burden on the Yemeni government’s budget and reducing the Central Bank of Yemen’s depletion of allocated foreign currency reserves, and thus enabling it to purchase petroleum derivatives to generate electricity from global markets.

It has been instrumental in providing a number of job opportunities at about 16,000. It also contributed to stimulating the logistical movement in transport services through the movement of ships, as the number of ships for internal transport reached 21 ships, and the number of tankers reached 9,928 tankers. The number of beneficiaries of the grant reached 9,837,044.

The Saudi government provided direct support to Yemen as part of a package of development support provided by the Gulf Cooperation Council countries to support and stimulate economic growth during the years 2012-2014.

During the years 2019 and 2022, the economic and development support and reform package provided by the Kingdom contributed to improving the financial situation, and this support included the Saudi oil derivatives grant, which was instrumental in reducing expenses and bringing down the burden on the government budget, which led to reducing the deficit rate from 38 percent to 23 percent, in addition to the deposits made to the Central Bank of Yemen, which contributed to supporting the exchange rate of the Yemeni riyal against the dollar and making it relatively stable.

hrough the Saudi Development and Reconstruction Program for Yemen, the Kingdom also provided more than 229 development projects and initiatives implemented by the program in various Yemeni governorates, serving the Yemeni citizens in eight basic and vital sectors such as education, health, water, energy, transportation, agriculture and fisheries, and developing and supporting capabilities of the Yemeni government and development programs.