Economy, Currency and Foreign Trade

Yemen’s unit of currency is the riyal, which consists of 100 fils (56.6 riyals equal U.S.$1, 1996, official rate; 162 riyals equal U.S.$1, 2000 free-market rate average). In March 1994 approximately 18 riyals equaled U.S.$1 officially; however, the currency declined sharply later that year, due largely to the country’s civil war and its lingering effects. In 1995 Yemen’s budget expenditures exceeded revenues by 24 percent. Yemen imports considerably more than it exports, and has relied quite heavily on foreign assistance to offset its trade deficit. Principal exports include crude oil, some refined petroleum products, textiles, hides and skins, coffee, vegetables, and dried fish; among Yemen’s many imported products are manufactured consumer goods, textiles, foodstuffs, machinery, transportation equipment, and chemicals. Leading purchasers of Yemen’s exports are South Korea, Singapore, Japan, the United States, Saudi Arabia, and Bahrain; chief sources of imports are the United Arab Emirates, Saudi Arabia, the United States, France, the United Kingdom, Malaysia, and Turkey.

Throughout the 20th century and probably earlier, the major export of both Yemens was Yemeni workers. This increased dramatically after the 1960s, and the two Yemens became largely remittance economies, increasingly dependent on hard currency earned by workers abroad, mainly in Saudi Arabia and other countries of the Arabian Peninsula. This changed in 1990, when Saudi Arabia withdrew the privileges of Yemenis working there and halted foreign aid to its southern neighbor; the move was made in retaliation for Yemen’s support for an Arab diplomatic and political solution to Iraq’s seizure of Kuwait and its resistance to the deployment of foreign troops to Saudi Arabia to counter the Iraqi military threat. As a result, 850,000 Yemeni workers returned home, producing a major reduction in national income, large-scale unemployment, and general economic upheaval. To compensate for the loss in remittances and economic assistance, the government of Yemen began to focus on creating a more viable and stable domestic economy.