From what was historically known as “Arabia Felix” – a land of prosperity and happiness – Yemen has become the most impoverished among the Arab countries. The government of the united Yemen, formed in 1990, has launched so far three five-year economic reform plans with the goal of restoring Yemen’s prosperity. Have these effort succeeded? What policies are needed to further reduce poverty? The Poverty Assessment report aims to answer these questions. This report measures poverty in Yemen in 2005/06, and evaluates the change in poverty compared to 1998, the two years for which comparable household budget surveys are available. The period between the two survey years (1998 and 2005/06), more or less overlaps the first two five-year economic plans and captures the effect of the economic reform programs launched since 1995.