Sana’a, at first glance, might appear to be a city resisting collapse. Its historic and modern markets are crowded with passersby, traffic never lets up, and shops stay open until late into the night. Yet this outward appearance conceals a profound structural shift in the city’s economic and social fabric: the bustle that fills its streets is less a sign of economic recovery or growing purchasing power than a relentless effort to secure basic needs amid deepening financial insecurity and the erosion of institutional stability.

More than a decade into the conflict, Yemen’s crisis has extended far beyond physical destruction, reshaping the details of urban life, particularly in areas under the control of the Houthi group (Ansar Allah). The financial and monetary split between rival centers of power, combined with the breakdown of central bank functions and the halt in salary payments to hundreds of thousands of public-sector employees, has driven a shift from an institutional economy to a household-based one. Amid the declining role of public institutions, communities have been forced to devise alternative survival mechanisms, relying on local solidarity networks and household savings. The structural crisis and economic decline are clearly visible through the changes in people’s everyday lives. Drawing on the author’s personal observations as a resident of Sana’a and insights from interviews with local residents, this article examines how prolonged conflict has transformed the city’s economic and social fabric and how current survival strategies are undermining the foundations of its future.

A Shrinking Economy

World Bank estimates point to a continued contraction in the Yemeni economy, which was projected to have shrunk by 1.5 percent in 2025.^[1] Real per capita GDP is down by around 58 percent from pre-war levels,^[2] falling in nominal terms to roughly US$384 according to the International Monetary Fund,^[3] placing individual income among the lowest in the world. These macroeconomic shifts serve as the direct structural driver behind more than 18 million Yemenis slipping into acute food insecurity and the widening circle of total humanitarian need, which now encompasses around 22 million people,^[4] at a time when international funding is in sharp decline.

Among the most consequential effects of war has been the suspension of state salaries. For decades, the monthly salaries of state employees were a pillar of middle-class stability and a regulator of the urban economic cycle. Families relied on this steady income to build long-term plans for education, healthcare, and housing, just as merchants relied on it to make investment and supply decisions based on stable, sustainable local demand.

The suspension of salaries in Sana’a, the subsequent reliance on half-salaries paid out at irregular intervals, and the general diminishment of purchasing power caused this system to collapse.^[5] The fallout triggered a complete shift in general consumption patterns. Families moved from monthly financial planning to managing whatever cash was available day to day, and consumer habits shifted away from bulk buying or building up food stocks to what is known locally as the single-unit system, where families buy limited quantities of staples like oil, sugar, and rice to cover a single day’s needs, relying on daily earnings or short-term credit.^[6]

This quickly affected household assets and accumulated savings, pushing many families to sell off gold holdings and property, and ultimately personal belongings and household furniture. Financial hardship is now clearly visible in local online marketplaces. Facebook buy-and-sell pages and female-led business groups on WhatsApp show a noticeable rise in families offering personal belongings for sale, often under the pretext that they might be moving elsewhere. In reality, many families have been forced to sell off their household assets to pay rent, cover emergency medical costs, or cover new fees arising from the loss of free public education.^[7]

The Growth of the Informal Sector

The ongoing institutional dysfunction has intensified pressures on Sana’a’s residents to diversify their income strategies. While some have long supplemented formal employment with additional income sources or temporary work, the deepening economic crisis has transformed what was once an alternative livelihood strategy into a necessary means of survival.

It has become increasingly common for teachers and administrators to take on extra work once their official hours end. The daily routine of Khaled,^[8] a history teacher in his fifties, captures the transformation.^[9] After leaving his government school in the heart of Sana’a, Khaled heads straight to a small vegetable stand he runs in the nearby market, the only way he can provide for his family. His situation mirrors that of thousands of teachers and civil servants, many of whom have turned to driving motorcycles or taxis. Residents need immediate cash to cover living costs. As a result, public sector jobs have become a secondary aspect of people’s overall livelihood strategies, which have become primarily focused on responding to crises. Formal employment has been stripped of its historical role in determining financial stability or social standing.

Adaptive strategies have been particularly evident among women. Recent years have seen a marked expansion in women’s economic contributions from within the home, moving beyond traditional patterns, as houses have turned into small production units specializing in food and sweets, sewing, and handicrafts.^[10] Digital platforms and messaging apps such as Telegram and WhatsApp have opened up an alternative, low-cost marketing space that bypasses the bureaucratic procedures and financial obligations tied to traditional markets.^[11]

Home-based commercial activities generate direct income that supports household budgets, but workers lack legal and regulatory protections and access to credit, which confine them to low-productivity work and leave them highly exposed to local fluctuations.

For Latifa, a young woman in Sana’a, entrepreneurship began with a smartphone rather than a shop. She started selling women’s and children’s clothing through social media, purchasing only small quantities. The lack of commercial rent made the business possible, but the limitations on inventory brought their own problems: she had little working capital, no financial cushion, and no reliable way to absorb a sudden decline in demand or an increase in wholesale prices.

Latifa’s business operates on a simple cycle: buy a small quantity, sell it, and use the proceeds to purchase the next batch. A weak sales week therefore affects more than her profits; it can interrupt the entire cycle. She has considered expanding her inventory and adding household products, but doing so would require capital that she cannot easily access through the formal financial system.^[12]

Her experience illustrates a broader pattern documented among Yemeni women entrepreneurs. Home-based and digital businesses can provide an important source of household income while remaining constrained by limited access to capital, markets, and business-development support. Yemeni women entrepreneurs operate amid market uncertainty and with limited access to capital. Many women begin with skills and ideas, they struggle to turn them into sustainable businesses without financial and technical support.^[13]

Young people are affected by similar pressures. Mahmoud, a young mobile-phone technician in Sana’a, represents another side of the same informal economy. He has the technical skills to repair phones, but his business operates with very little working capital. Instead of maintaining a stock of spare parts, he often purchases components only after a customer brings in a device that needs repair.

This model keeps his initial costs low, but it also prevents him from taking advantage of larger orders or expanding his services. If several customers delay payment, part of his limited capital becomes locked up. When demand falls, his income can quickly drop below the amount needed to cover rent, transportation, and household expenses.^[14]

For Mahmoud, the barrier to growth is therefore not necessarily a lack of customers or technical ability. It is the absence of a financial buffer that would allow him to purchase equipment, maintain inventory, and survive periods of weak demand. His situation reflects the vulnerability of many micro and small enterprises in Yemen, where limited access to affordable finance, market uncertainty, and repeated economic shocks can keep businesses trapped at a small scale. The UNDP has similarly documented how access to training, equipment, and start-up support can determine whether young Yemenis are able to turn their technical skills into sustainable enterprises.^[15]

Umm Mohammed, a mother of four who sells baked goods through social media in Sana’a, described the reality of such work: “We work just to cover daily food costs and provide basic meals. Any rise in flour or cooking gas prices threatens to shut our work down completely, since we have no savings to protect us if we get sick or to support our work and avoid losses.”^[16]

This situation grows increasingly fragile as international funding for the humanitarian response in Yemen falls to just 28 percent of recorded needs.^[17] This critical funding shortfall represents the lowest level of relative international support that aid operations in the region have faced in a decade, prompting widespread scale-backs across food security, health, and clean water programs.

Social Relationships as an Alternative Safety Net

The decline in both services and the economic functions of formal institutions has given rise to alternative social protection mechanisms rooted in family relationships.^[18] Social capital, built on kinship ties, reputation, and neighborly relations, has become the key determinant of a household’s ability to manage livelihood crises and absorb successive economic shocks.^[19]

Amid the halt in oil exports and the downturn in productivity, remittances from expatriates, particularly from neighboring Gulf Cooperation Council countries, supply the local economy with foreign currency and secure baseline levels of household consumption. Remittances from Yemeni expatriates were estimated at US$7.4 billion in 2024, accounting for over 38 percent of Yemen’s GDP,^[20] and play an important role in preventing further economic and humanitarian deterioration. This growing dependence reflects a shift in which income is now generated largely beyond the country’s borders, tying local resilience directly to labor policies in host countries rather than to domestic production indicators.

At the local level, what is known as the “debt ledger”^[21] in Sana’a neighborhood grocery stores has effectively become a substitute for banks, functioning as a daily financing network that provides food and basic needs to residents without the complications of paper-based transactions, relying entirely on personal trust, reputation, and a family’s standing within the neighborhood. But this flexibility places a heavy burden on small shopkeepers, who risk bankruptcy as customers struggle to repay their debts. Abu Samir, a grocer in Sana’a, described this predicament: “The ledger has become heavier than the grocery store itself. Debts keep piling up from my neighbors, state employees hit by the salary cuts, and I can’t press them to pay. At the same time, I’ve had to start refusing credit to newly displaced families because I don’t know them.” He added: “If this goes on […] I’ll have to close my shop soon.”^[22]

The situation has produced a stark social divide within the city. Social capital, built on kinship ties, reputation, and neighborly relations, has become the key determinant of a household’s ability to absorb successive economic shocks.^[23] Conversely, isolated families and displaced households, lacking these social ties and local networks, remain the hardest hit and the hungriest. Forcible displacement strips households of established creditworthiness in their new local markets, where food is traditionally secured through informal credit lines based on long-standing family reputation. Cut off from communal solidarity networks (takaful) and facing social friction within their host environments, these marginalized populations are systematically excluded from neighborhood resource sharing—such as splitting the cost of water tankers or solar electricity networks. Consequently, internally displaced persons (IDPs) and geographically segregated communities experience compounding vulnerability that accelerates their slide into acute food insecurity.^[24]

The Price of Resilience: A Lost Generation

Sana’ani society is paying a steep price to stave off hunger, with education among the primary casualties. Recent data from the United Nations Children’s Fund (UNICEF) shows that more than 4.5 million children in Yemen are now out of school because of compounding poverty and the decade-long suspension of teachers’ salaries.^[25] Furthermore, the structural foundation of learning has frayed, with over 3,400 schools across the country now partially or completely damaged, or converted to non-educational uses.^[26] This forced an exodus from classrooms and systematically funneled an entire generation of youth into the informal labor market, trading long-term human development for immediate household survival.

In the heart of Sana’a, empirical field observations reveal that this institutional collapse has forced many households to pull their children from school, pushing them prematurely into a harsh, unregulated informal labor market dominated by vehicle repair, street vending, and scrap recycling. This forced trade-off sacrifices long-term generational literacy to satisfy immediate, daily survival needs.

Sultan, a government employee whose salary was cut and whose 14-year-old son had to leave school to work in a mechanic’s shop, describes this difficult choice: “My son’s school is practically closed for lack of teachers, and our household has no income. I had no choice but to let him leave his studies and learn a trade that helps us pay the rent and put flour and oil on the table, even if it means sacrificing his future.”^[27] This decline extends well beyond young schoolchildren, affecting young people who would otherwise be attending university but have lost hope of building a career path in the city’s shrinking economy. Migration has also shifted from a personal ambition to an obligatory family duty, aimed at securing remittances to support families back home.

The situation is gradually draining Sana’a of its qualified talent and young workforce, leaving future generations less skilled and less educated, weakening prospects for long-term economic recovery and reconstruction, and making the city’s future entirely dependent on external developments and aid.

The Trap of Survival and the Requirements for Recovery

Unlike Aden or Taiz, which suffered extensive urban warfare, Sana’a’s physical infrastructure remains mostly intact, and its old city, a UNESCO World Heritage site, remains remarkably well preserved, with its distinctive architecture and traditional urban fabric still visible.

However, this historic character has come under increasing pressure over the years of conflict. Repeated airstrikes on Sana’a and the wider metropolitan area, including those carried out during the Saudi-led intervention, along with more recent Israeli strikes, have contributed to a broader deterioration in the urban environment, while wartime disruption has limited maintenance and conservation efforts. Over time, the combined effects of physical damage, neglect, and inadequate restoration have become increasingly visible in the condition of historic buildings and surrounding structures.^[28]

But for residents, the current crisis is primarily institutional and economic. Local coping mechanisms, such as reliance on informal work and community credit networks, have produced temporary stability at the lowest income levels. While these have kept buying and selling from grinding to a complete halt, and maintained a minimum level of cash liquidity in the market, they are incapable of generating economic growth or providing stable jobs.^[29]

Emergency practices are hardening into permanent economic patterns. The longer the crisis persists, the more it drives the growth of small-scale commercial activity with limited returns at the expense of more productive sectors, widens the gap between the unregulated informal economy and the formal, regulated economy, and further erodes the purchasing power of the middle class and public employees who have lost their incomes.

The traffic and commercial activity in Sana’a’s markets do not reflect an improvement in economic indicators. Rather, they are the product of residents’ daily efforts to secure food and basic necessities, for which they sacrifice educational opportunities and the development of future skills. The challenge, then, is for the de facto authorities in Sana’a to design and execute solutions that end reliance on these fragile activities, reactivate formal financial institutions, and move the economy toward a regulated model capable of providing sustainable jobs and delivering financial stability for citizens.

Sana’a is not collapsing in the traditional sense, nor is it recovering economically. It is a city that has rewritten its mechanisms for survival, but at the cost of its future. Its coping mechanisms are fundamentally extractive, relying on the systematic liquidation of the city’s long-term assets to meet immediate baseline needs. By pulling millions of children out of classrooms and into the informal labor market, the city is depleting its precious human capital. As households are forced to sell off their generational wealth—such as land, jewelry, and capital assets—the complete lack of institutional investment causes critical urban infrastructure to decay. Sana’a is effectively cannibalizing its tomorrow to underwrite the cost of staying alive. Ultimately, the most dangerous thing the conflict has produced is the entrenchment of a war economy that is highly adaptable to acute crisis, yet structurally incapable of sustainable human development.