With Yemen’s National Dialogue process approaching completion, the nation is poised to move to the next stage of its transition. Now is the time for the government to address not only demands for more inclusive political participation, but also the economic aspirations of most Yemenis who have not experienced any improvement in their standard of living since the 2011 popular revolution. Without making progress on the economic front a priority, the democratic transition process risks derailment and its leadership a complete loss of credibility, which could result in renewed conflict. For too long, taking tough economic decisions has been postponed...

The path toward economic reform is not a new topic. There is relative consensus among Yemeni and international experts about the essential components and parameters of a reform agenda: economic diversification, reduction of fuel subsidies, strengthening tax and customs administration and collection, investment in infrastructure and basic service delivery, creating a better operating environment for businesses, and expanding access to financial services. The IMF recently completed its periodic assessment of Yemen’s economic profile, and emphasized the danger of its growing budget deficit and the need to reorient the budget toward pro-growth and pro-poor expenditures.⁸

The current discussion in the National...

Assessing the best use of international donor funds and creating mechanisms to implement projects in an effective, cost-efficient way will require tackling the most sensitive political issues. The previous regime and elite insiders benefited from significant distortions in the economy by taking advantage of subsidized fuel and perpetuating inefficiencies in the electricity sector. A small number of families, including that of the former president, have a vested interest in maintaining the status quo and this behavior is hindering the country’s economic development. For the Yemeni government to effectively rebuild the economy and restructure the country, these two issues will need...