Years of conflict have created a broken economic system in Yemen, with civilians bearing the brunt of hardship. The fragmentation of the state, entrenchment of a war economy, disruption of oil exports, and widespread corruption have eroded the country’s pre-war economic base. In Houthi-controlled areas, where the majority of Yemen’s population resides, the emergence of an extractive governance model and detention of aid workers has further deepened the humanitarian crisis. An unprecedented system of tolls, taxes, and compulsory contributions to the Houthi war machine has diverted funds away from an increasingly destitute population — all while the group uses humanitarian rhetoric to extract concessions from Saudi Arabia and the international community. This model is now showing mounting signs of strain, evidenced by a popular outcry over the spread of hunger in areas under Houthi control.

The escalation against Saudi Arabia and threats to restrict the Bab al-Mandab, while linked to broader geopolitical calculations, serve to deflect from growing domestic pressure on Houthi governance and economic mismanagement. The potential return to a full-scale war also comes amid a marked decline in international assistance and waning attention to Yemen’s worsening humanitarian situation, driven in part by the Houthis’ arrest and detention of aid workers on trumped-up espionage charges, creating an untenable operational environment.

The recent emergence of a popular discourse on rising levels of hunger represents a rare and particularly vocal expression of dissent, given the group’s harsh repression of opposing voices. Criticism over deteriorating living conditions in Houthi-controlled areas has been voiced not only by activists, journalists, and social media influencers, but by individuals close to or supportive of the Houthi authorities, including former fighters. After acting Houthi Prime Minister Mohammed Miftah faced backlash for mocking the suffering of the hungry, the group’s leader, Abdelmalek al-Houthi, acknowledged the severity of food insecurity among Yemenis, stating that some had even resorted to “eating tree leaves,” and others were surviving on one meal a day. But Abdelmalek took pains to blame the crisis on a Saudi “blockade” rather than accept any responsibility for economic mismanagement.

For over a decade, the Houthis have pursued destructive fiscal and economic policies whose consequences are becoming increasingly apparent. Through an expanding web of taxes, levies, and financial controls, they have tightened their grip on the economy, squeezing independent businesses while privileging their members and connections. The banking sector was restructured in line with the group’s autarkic political and economic goals, and the payment of interest was banned. Independent organizations providing essential services to the population have been subjected to systematic repression, as part of a broader strategy to consolidate control over the humanitarian sector, marginalize independent organizations, and replace them with entities affiliated with the group. This included raids on offices and forced closures, further strengthening the group’s control over the delivery of humanitarian assistance.

The effect of prolonged war on Yemenis is staggering. More than half of the country’s population – 22 million people – now requires some form of humanitarian assistance, while 18.3 million face acute food insecurity, according to the UN’s comprehensive humanitarian response plan for this year. In 2025, Yemen’s aid plan received just US$687.9 million, only 28 percent of the requested US$2.48 billion, the lowest level of funding in 10 years. Despite growing need, the shortfall forced all clusters to scale back critical services. As of this month, the 2026 plan has received less than 20 percent of the requested funding.

Since they took control of Sana’a in 2014, the Houthis have created a highly centralized financial system that is both efficient and onerous in extracting public resources through taxes, customs duties, zakat (obligatory religious alms), endowment revenues, fuel sales, fees, and mandatory support for military mobilization and various religious and ideological events. Though they control only part of Yemen, Houthi authorities have managed to collect revenues far exceeding those available to pre-war governments. Most of this revenue, however, has been directed toward military, security, and ideological priorities that serve the group’s interests; public spending on social services has remained extremely low, and in some areas it is nonexistent.

The non-payment of public sector salaries is a key contributor to hunger in northern Yemen. By the end of 2024, most public sector employees had received only a half-salary payment, covering what they were owed up to the first half of November 2018. Although the Houthis introduced a new salary mechanism in 2025, they have preserved a system of irregular and partial payments. These rely on revenues generated by independent public institutions outside the state budget, granting the Houthi Ministry of Finance sweeping control over their allocation. The reality is that hundreds of thousands of employees have gone without regular salaries for years.

In a low-income economy such as Yemen’s, the impact of government salaries extends beyond the households that receive them: they are a major driver of the local economic cycle. When the incomes of nearly one million public-sector employees are suspended, the damage spreads throughout local markets. As consumer spending falls, merchants’ sales decline, transport, services, and agricultural activities contract, and thousands of small and medium-sized enterprises go out of business.

Houthi economic intervention has not been limited to the public sector. In recent years, the private sector has undergone a far-reaching restructuring, transforming the business environment in Houthi-controlled areas. Through the creation of economic and commercial entities affiliated with the group, the imposition of additional levies and fees, and the reorganization of import and distribution regulations, the space available for established companies to compete has narrowed. Compounded by the US designation of the Houthis as a Foreign Terrorist Organization, investor confidence has declined, and thousands of businesses have either closed, scaled back their operations, or relocated to areas outside Houthi control. This has contributed to the loss of thousands of jobs and the expansion of poverty.

Any future political settlement or economic package should prioritize restoring regular salary payments through a transparent, internationally monitored mechanism. The failure of the 2018 Stockholm Agreement’s revenue mechanism – designed to use Hudaydah’s customs revenues to finance public salaries – was quickly undermined by the Houthis, who diverted the funds, leading to the arrangement’s collapse. It illustrated the risks of entrusting public revenues to a belligerent party. Future arrangements should rely on verified channels, robust oversight, regular audits, and transparent reporting to ensure aid reaches civilian beneficiaries rather than financing patronage networks or the war effort.

International and regional actors must stop treating economic support as an unconditional confidence-building measure. Assistance must reinforce accountable institutions and reduce opportunities for resource diversion. External mediators must categorically reject frameworks that allow conflict parties to frame political demands as humanitarian measures to secure concessions. Sustainable recovery requires that economic engagement serve civilian welfare, not entrench armed groups.

In parallel, efforts must be directed toward protecting the private sector, ensuring a safe operating environment for humanitarian organizations, and rebuilding economic institutions capable of restoring consumer confidence and stimulating investment and production. Without such measures, hunger in Yemen will persist even if military operations subside, as the core of the crisis lies not in a shortage of food, but in the economic and institutional distortions entrenched by years of war.