Editor’s Note: This analysis first appeared in The Week in Yemen, the Sana’a Center’s weekly report series.
During a meeting in Riyadh, the Presidential Leadership Council (PLC) discussed the implementation of the government’s 2026 program alongside projected state budget figures. The draft program—a copy of which was viewed by the Sana’a Center—is structured into three tiers: a situational assessment, the government strategy, and its corresponding implementation matrix.
In its situational diagnosis, the government acknowledged the litany of economic, social, humanitarian, and political challenges, which have intensified since the outbreak of the war. The Yemeni economy has recorded a cumulative contraction estimated at over 50 percent of its GDP, driven by the halt of production in vital sectors, the destruction of public and private infrastructure, and significant capital flight. These factors have plunged the economy into a deep recession, paralyzing both commercial and development activities. The country has also experienced repeated cycles of hyperinflation and a historic collapse of the local currency, particularly in government-controlled areas. This deterioration has stripped the Yemeni rial of its function as a store of value and led to a near-total erosion of citizens’ purchasing power. Prices of basic commodities and imported foodstuffs have multiplied several times over, rendering them unaffordable for the vast majority of the population.
Meanwhile, the country’s public finances are facing an unprecedented deficit, which has deepened dangerously following the cessation of crude oil exports—once the primary source of revenue and foreign currency – severely hampering the government’s ability to meet its basic fiscal obligations, including paying salaries regularly, providing letters of credit for imports, and funding maintenance projects for public services such as electricity. Poverty and unemployment rates have also soared, with over 80 percent of the population under the poverty line, making Yemen one of the poorest countries in the world. This has been accompanied by record unemployment rates resulting from the dismissal of hundreds of thousands of workers in the collapsed private sector, and the halt of salary payments for many public sector employees, especially in Houthi-controlled areas, leading to a loss of income and exacerbating poverty.
Yemen is also classified as one of the world’s worst food security crises, with over 17 million people facing high levels of acute hunger amidst an alarming decline in international aid. The conflict has triggered a massive displacement, forcing more than 4.5 million Yemenis to flee their homes, making Yemen the fourth-largest such crisis globally. Basic health services have collapsed, with barely half of the country’s health facilities functioning, while the hospitals and clinics that remain operational lack essential medicines, equipment, and medical personnel. The collapse extends to the water, education, and electricity sectors, depriving millions of Yemenis of their basic rights and leaving them vulnerable to outbreaks of preventable diseases such as cholera and dengue fever.
The government says its new strategy and implementation matrix signal a definitive transition from theoretical frameworks to rigorous, practical application. The strategic objectives are anchored in two past foundational frameworks: the Economic Recovery Plan 2025–2026, serving as a national roadmap for transitioning from emergency response to economic stability; and the PLC’s Resolution No. (11) of 2025, which formally adopted the Comprehensive Economic Reform Priorities Plan. But the Economic Recovery Plan was overly ambitious, featuring an extensive list of priorities that would be difficult to achieve within a two-year timeframe, particularly given current institutional and financial capacity constraints.
Though the government says its new approach to reform is a clear departure, whether it reflects a realistic response to the complex challenges on the ground and can avoid repeating past failures remains to be seen. The current plan is formulated in a comprehensive, time-bound implementation matrix to meet short-term objectives and serve long-term strategic goals. Top priority areas include slowing the deterioration of the national economy and protecting livelihoods. To achieve this, policies would be adopted to achieve a tangible economic and social impact, with an emphasis on interventions that maximize cross-sectoral benefits. Interventions would also be designed within the existing legal and political frameworks, as complex legislative changes may hinder the pace of implementation.
The government program is anchored in six strategic priorities:
To achieve its first priority, the government seeks to consolidate political and security stability as two essential prerequisites for economic recovery. This requires the unification of security and military decision-making—a mandate that will be challenging to fulfill within a one-year timeframe, given the deep political and security divisions between the government’s various factions. The second priority focuses on stimulating economic growth, diversifying sources of income, restoring fiscal and monetary balances, boosting public revenues, controlling public expenditure, and improving public resource management. Furthermore, it seeks to stimulate productive sectors, encourage investment, and create job opportunities—thereby raising living standards and reducing poverty and unemployment.
While the government asserts that its new plan is grounded in realism and feasibility, it remains, in practice, a simulation of earlier ambitious attempts at reform. The approach continues to overlook the complex, entrenched realities on the ground and the significant institutional gaps that historically hinder implementation. A close analysis of the highly inflated budget projections reveals a degree of fiscal superficiality: total revenues are estimated at YR3.96 trillion, with 41.5 percent from taxes and 35 percent from income from government-owned property and the sale of goods and services. Recurrent grants and capital grants, heavily reliant on Saudi support, are estimated at YR858.7 billion (22 percent of revenue). These figures are nearly double the YR2.066 trillion collected in 2024, the last year for which data is available, of which 61 percent consisted of external grants, according to the last annual report from the Central Bank of Yemen in Aden (CBY-Aden).
Expenditures are estimated at YR4.8 trillion, a 180 percent increase over the YR2.7 trillion spent in 2024. Projected spending on salaries and goods and services is set at YR1.35 trillion each, significantly higher than historical figures. While the inflated wage bill reflects the integration of various military and security units into the state budget, the government’s capacity to meet these immense obligations remains the primary challenge. For instance, the plan proposes increasing the budget for goods and services by 355 percent (from YR298 billion in 2024 to YR1.35 trillion) to address the collapse of essential services—a target that would severely test the government’s fiscal capacity.
This analysis is part of a series of publications produced by the Sana’a Center and funded by the Norwegian Ministry of Foreign Affairs under the Reimagining Yemen’s Peace in the Regional Landscape program.
