Yemen’s economy was based on subsistence agriculture and was largely self-sufficient. with the import of cheap goods from abroad, North Yemen moved quickly from self-sufficiency to dependence after 1960, as the south had done decades earlier. During the 1970s and 1980s North Yemen came to rely heavily on Saudi Arabia, the Arab Gulf states, and to a lesser extent, the western industrial countries for financial and other assistance, while South Yemen became equally dependent on the Union of Soviet Socialist Republics (USSR) and other Communist countries.

Oil and natural gas, determined near Shabwah in the former South Yemen in 1983 and near Ma'rib in the north the following year, now generate a major portion of the national income. Exploration and development by American, Korean, Japanese, and other foreign companies continues. A pipeline carries northern Yemen's oil to the Red Sea coast, and a similar line serving the southern region by way of Little Aden was under construction in the early 1990s.

Yemen, one of the poorest countries in the Arab world, reported strong growth in the mid-1990s with the onset of oil production, but was harmed by low oil prices in 1998. Yemen has embarked on an IMF-supported structural adjustment program designed to modernize and streamline the economy, which has led to foreign debt relief and restructuring. Aided by higher oil prices in 1999-2000, Yemen worked to maintain tight control over spending and implement additional components of the IMF program. A high population growth rate of nearly 3.4% and internal political dissension complicate the government's task.