Mokha Economic Briefing/May 2026
During May 2026, Yemen’s economy continued to face complex challenges stemming from the ongoing war and institutional fragmentation between areas controlled by the internationally recognized government and those under the control of the Houthi rebel group. Throughout the month, several indicators highlighted mounting pressures on the private sector and humanitarian operations, alongside persistent challenges related to energy supplies, fuel availability, and public resources. At the same time, the period witnessed efforts by the government and regional partners to mitigate the severity of the crisis. However, the overall developments confirm that Yemen’s economy remains fragile, with limited prospects for recovery in the near term.
Houthi Seizure of U.S. Equipment and Supplies Following the Suspension of Humanitarian Programs
Reports in early May indicated that the Houthi rebel group had seized U.S. equipment and supplies following the United States’ suspension of some of its humanitarian programs in Yemen. This development comes within the broader context of escalating tensions between the group and a number of international organizations and donor agencies in recent years, accompanied by restrictions and measures affecting humanitarian workers and relief programs.
The significance of this incident goes beyond the value of the confiscated equipment. It reflects the challenges facing humanitarian operations in areas controlled by the Houthi rebel group. Humanitarian assistance represents an important source of financial support and basic services, and is also linked to employment opportunities, procurement activities, and wider local economic activity.
The incident also raises concerns among international donors regarding the safety of their assets and programs, which may prompt some actors to tighten funding conditions or scale back their operations. Amid declining humanitarian funding globally, the continuation of such practices could contribute to a reduction in aid flows to Yemen, increasing economic and humanitarian pressures on a population of which a large segment depends on external assistance.
Freezing the Bank Accounts of Islamic Relief in Sana’a
During May, a court operating under the control of the Houthi rebel group issued a decision to freeze the bank accounts of Islamic Relief in banks operating in Sana’a. This step represents an extension of a series of measures that have targeted international and regional organizations working in the humanitarian field over recent years.
This measure comes at a time when Yemen is facing one of the world’s largest humanitarian crises, with millions of Yemenis directly or indirectly dependent on humanitarian assistance to meet their basic needs, including food, health services, water, and social protection. Therefore, any restrictions imposed on humanitarian organizations do not affect these organizations alone, but also extend to the beneficiaries of their services and programs.
The freezing of bank accounts represents one of the most serious forms of interference in the work of humanitarian organizations, as it directly affects their ability to implement programs and meet financial obligations, including salaries for local staff, payments to suppliers and contractors, and the financing of field activities. The continuation of such measures also increases the level of operational risk facing international organizations, and may push some of them to reduce their activities or reassess their presence in areas controlled by the Houthi rebel group.
These measures also place international organizations in a more complex and high-risk operating environment, which could affect the scale of future programs and projects. Their impact is not limited to the humanitarian sector, but also extends to the local economy, which benefits from the operational spending of organizations and the related employment opportunities, services, and commercial activities.
Offering Tadhamon Bank Lands for Sale at Public Auction
May witnessed a notable development in Yemen’s banking sector, after a court operating under the control of the Houthi rebel group announced the sale of lands owned by Tadhamon International Islamic Bank through public auction. The lands cover an area of approximately 2,792 labnah, with an estimated value exceeding YER 9.4 billion. The decision triggered wide reactions, particularly after the internationally recognized government objected to the move and described the procedures as illegal and not based on recognized judicial rulings.
The significance of this case goes beyond the legal dispute over asset ownership, as it directly affects confidence in the banking sector and the investment environment in areas controlled by the militia. Banks represent one of the main pillars of any economic activity, and any measures affecting their assets or properties raise concerns among investors and business owners regarding the protection of private property and the stability of the economic environment.
This incident also reflects the scale of the challenges facing the banking sector amid the institutional division that has persisted for years between areas controlled by the internationally recognized government and those under the control of the Houthi rebel militia. This division has led to duplication in regulatory decisions and procedures, creating a complex operating environment for banks and financial institutions, which are now functioning under divergent monetary and supervisory authorities.
Such measures may also push financial institutions to adopt more cautious policies in granting financing and undertaking new investments, due to the heightened level of legal and regulatory risks. This, in turn, reduces financing opportunities available to the private sector and weakens the ability of companies and enterprises to expand or implement new investments.
Fuel Imports Through Hodeidah Ports Controlled by the Militia Decline by 76%
UN data released during May showed that fuel imports through the ports of Hodeidah, Salif, and Ras Issa declined by 76% during the first quarter of 2026 compared with the same period of the previous year, marking the largest drop recorded in four years. This decline represents one of the most significant economic indicators during the month, given the central role that petroleum products play in operating various economic and service activities.
This decline comes amid escalating military tensions in the Red Sea, increasing restrictions on the movement of ships and tankers heading to ports under the control of the Houthi rebel group, and the growing uncertainty surrounding import operations and maritime transport in recent months.
The decline raises concerns over potential fuel supply bottlenecks in the coming period, which could lead to higher prices and an expansion of black-market activity, particularly if imports continue to fall or if the arrival of new shipments is disrupted. In previous years, Yemen witnessed similar episodes that led to widespread market disruptions and increases in transport and production costs.
At the humanitarian level, the impact of fuel shortages is not limited to the economy alone, but also extends to basic services, including the operation of hospitals and transportation systems. This could further increase the living burdens on the population amid the difficult economic conditions facing the country.
Siege and Shutdown of the Shamlan Water Factory
May also saw a new escalation in the pressures facing private-sector facilities in areas controlled by the Houthi rebel group, after armed men surrounded the Shamlan Water Factory in Sana’a and closed its main gate to demand financial payments, leading to the suspension of work at the factory.
This incident carries particular significance given that the Shamlan factory is one of the oldest and largest facilities operating in the bottled water sector in the country. It also serves as an example of the growing challenges facing the private sector in an economic environment marked by weak institutional stability and multiple centers of influence.
The impact of such incidents is not limited to the targeted facility alone, but extends to the overall business and investment environment. Disrupting the operations of any productive facility leads to direct losses in production and sales, and also affects the supply chains, workers, and distributors connected to it.
Such practices also reinforce concerns among investors and business owners regarding the stability of economic activities and the protection of private investments. With repeated cases of unlawful financial demands or interference in the operations of companies, the cost of doing business rises, while investors become increasingly reluctant to expand or inject new investments.
Diesel Price Increase in Areas Controlled by the Internationally Recognized Government
During May, the Aden Oil Company announced a 24.5% increase in the price of diesel, bringing the cost of a 20-liter container to YER 36,000. The move reflects the mounting pressures facing the internationally recognized government in securing petroleum products and financing the needs of the local market.
The decision comes amid a continuing fiscal crisis faced by the government since the suspension of oil exports following attacks carried out by the Houthi rebel group against export terminals. This has led to a sharp decline in foreign currency resources and public revenues, further complicating the government’s ability to finance fuel imports and support basic services.
The increase in diesel prices is expected to affect the cost of transporting goods between governorates, potentially leading to higher prices for a range of basic commodities and food items. Agricultural and industrial activities are also likely to face higher operating costs, particularly given their heavy reliance on fuel to operate equipment, machinery, and alternative energy sources.
The decision also comes at a time when local markets are already experiencing weak purchasing power and rising living costs, increasing the likelihood that part of the additional burden will be passed on to final consumers. These effects are further amplified in an economy that depends heavily on road transport for the movement of goods and commodities across governorates.
Saudi Grant to Support Yemen’s Electricity Sector
In May, the Kingdom of Saudi Arabia announced an urgent grant of USD 150 million to the internationally recognized government, allocated to provide the petroleum products needed to operate power plants until the end of 2026.
The grant comes at a time when the electricity sector is facing significant challenges due to limited financial resources and the rising cost of fuel required to operate power generation stations. The electricity crisis remains one of the most pressing economic and service-related challenges in areas controlled by the internationally recognized government. A large share of electricity generation depends on imported fuel, making the stability of the service directly linked to the government’s ability to secure the necessary financing to purchase petroleum products.
The grant is expected to ease part of the pressure on public finances by providing the government with an important resource to cover the needs of the electricity sector without placing additional burdens on the state budget during the coming period. It may also allow part of the available resources to be redirected toward other priorities related to public services and operational commitments.
The grant is expected to help improve the stability of electricity services and reduce recurrent power outages, particularly during periods of high energy demand. Improved electricity supply would also have a positive impact on various economic activities, including the commercial, industrial, and service sectors, all of which depend directly on the stability of electric power.
The grant also carries a broader economic dimension, as it may reduce reliance on high-cost alternative energy solutions, such as commercial generators, which impose an additional burden on both citizens and the private sector. Greater stability in electricity supply could also help reduce part of the operating and production costs across several economic sectors.
Liberalization of the Customs Valuation Exchange Rate
The internationally recognized government approved the liberalization of the customs valuation exchange rate, in a move aimed at increasing public revenues and bringing customs duties closer to the prevailing market exchange rate. This comes amid continued fiscal pressures resulting from the decline in public resources and the suspension of oil exports since late 2022, following attacks carried out by the Houthi rebel group against export terminals.
The decision is one of the most notable economic developments during the month, given its direct implications for import activity, prices, and government revenues. The government’s decision is based on the need to compensate for part of the sharp decline in revenues, improve customs collection, and reduce the gap between the customs valuation exchange rate and the actual exchange rate.
