At a livestock market in war-battered Yemen, goats and sheep meant to be slaughtered for the Muslim Eid al-Adha holiday are happily munching on hay instead of leaving with a buyer.

The market trader Eiad al-Alimi expected better business this year following a lull in fighting and renewed efforts to end Yemen's eight-year-long conflict.

But a grinding economic crisis – marked by a collapsed currency and deepened by import bans and attacks on critical oil infrastructure – has put holiday cheer on hold.

"We had high expectations," Alimi told Agence France-Presse (AFP) from the southern city of Aden, the stronghold of the ousted government, as dozens of unsold sheep grazed behind him.

"We expected things to improve, the lives of citizens to improve," he said. "But unfortunately, everything is still expensive – even more so than before."

Yemen's tensions between Iran-backed Houthi rebels and a Saudi-led coalition have reduced sharply since a U.N.-brokered truce began in April last year, even though it lapsed in October.

But talks towards a political solution appear stalled and there is no sign of a peace dividend for the embattled residents of the Arabian Peninsula's poorest country.

The economy has continued its downward spiral, leaving many Yemenis battling to survive as living conditions deteriorate.

"People can't even afford to buy basic foodstuffs," said Amer Mohammed, a teacher from Aden who was shopping at the livestock market.

"How can they afford" sheep or mutton, he asked. "Even those who were able to buy a sacrificial animal for Eid last year will only be able to buy half an animal this year."

'We are almost dead'

Yemen's economy was already in crisis before the Houthis seized the capital Sanaa in September 2014, prompting the Saudi-led military intervention the following March.

Hundreds of thousands of people have died in the fighting or from indirect causes, such as lack of food or water, in what the U.N. calls one of the world's worst humanitarian crises.

Over two-thirds of the population live in poverty, according to the U.N., including government employees in Houthi-controlled areas who have not been paid in years.

The U.N. special envoy for Yemen, Hans Grundberg, said "economic warfare" between the opposing parties has compounded the country's problems.

"While the parties have taken some steps forward, they have unfortunately also taken steps backward," he told the Yemen International Forum in The Hague this month.

"Economic escalatory measures and countermeasures taken by the parties have further damaged Yemen's already struggling economy."

At the end of last year, Houthi drone attacks on government-run oil terminals halted hydrocarbon exports, the main source of income for the Saudi-backed authorities.

This aggravated the collapse of the Yemeni rial, further limiting the government's ability to finance basic services and the salaries of civil servants.

"There is no electricity, no water, no salaries," said Waheeb Dawood, an Aden resident.

"We are almost dead, not alive," he told AFP from a street market, where vendors outnumbered customers in the days leading up to the Eid holiday.

'Pervasive corruption'

Already beleaguered by war, Yemen's private sector suffers from "pervasive corruption" as well as double taxation by the warring parties, according to a World Bank report in April which forecasts a recession and 16.8% inflation this year.

Areas under rebel control, which are home to nearly 80% of the population, are facing severe economic woes despite the easing of a maritime and air blockade long imposed by Saudi Arabia.

"There is indeed a truce on the military and political level, but the battle has intensified in the economic sphere," said Moustafa Nasr, president of the Yemeni Studies and Economic Media Center, a civil society group.

Despite the opening of shipping lanes to the Houthi-held port of Hodeidah, "the entry of goods imported from ports controlled by the government has been prohibited," worsening shortages and inflation, he explained.

In Hodeidah in western Yemen, Hassan, a former civil servant who asked not to use his full name, said he had started selling ice cream to support his family.

Having received no salary in years, he said he must sell his car to cover the costs of this year's Eid celebrations.

"I can't afford to pay for gas anyway," he said.