Yemen Economy Deteriorating

National Yemen

Resigned Yemen Prime Minister Khalid Bahah

By NY Staff

Yemen is currently going through a complicated political and financial crisis, one that is threatening total economic deterioration. This deterioration may paralyze the economy, making it incapable of paying employees’ salaries or for basic services. The overtaking of the country’s bureaus and ministries by the Houthis stopped foreign aid, especially that provided by Saudi Arabia. Other donors have also lost their trust in the government ruled by the Houthis.

The resignation of President Abd Rabbo Mansur Hadi and his regime have put the country in a legal impasse. Day by day, Yemen’s economy is pushed further towards the abyss. According to Yemeni sources, the end of January will be the deadline that donors have set for the government to fulfill their obligations and pledges. This was to be achieved by completing supported projects based on partnership with the private sector. Those obligations include power and energy projects that are considered an economic and strategic priority.

Dr. Mohammed Al-Hawri, Agent of the Ministry of Planning, said to Al-Arabi Al-Jadeed that the resigned Yemeni government was unable to accomplish the required tasks by the set deadline of January 31 due to political developments and the invasion of Yemen’s presidential palace by the Houthis that led to the resignation of the president and his cabinet. Yemen’s government has said that the security obstacles that occurred during the last months have prevented them from carrying out the reforms and the adopted financial policies to gain donors’ trust.

Partnership and networking expert in the Executive Bureau, Mujahed Al-Msa’abi, confirmed that the bureau did not receive any official deadline by donor countries concerning the pledges. However, he clarified that the donors set conditions and are claiming Yemen’s government must fulfill them. Al-Msa’abi also said to Al-Arabi Al-Jadeed, “Under the current situation everything is paralyzed. Our country has neither a president nor a regime, and everything is frozen. It’s only natural for the donors not to provide any support for Yemen given the circumstances.”

A report issued by the Executive Bureau confirmed the acceleration of absorbing donor’s pledges in Yemen. The political and security chaos still hinders economic stability and has disabled the transfer of money by donors.

The report also stated that the preparation of the repair program of economic policies was expected to be ready by last October. However, it has been postponed to the end of December 2015 due to the recent security issues. “The overtaking of the capital by the armed Houthis has resulted in the aggravation of the fragile Yemen economy. This is because it has caused a recession, the suppression of economic activity, and a decrease in the amount of cash provided by foreign aid.”

According to the report, the progression of carrying out reform policies is still facing obstacles. This is because of the severe political and security disorders that Yemen has witnessed during the current year. Those disorders have also aroused fears about the general situation of the country. Yemen’s resigned Prime Minister Khaled Bahah said that the previous government failed to utilize 10 billion dollars provided by donor countries to Yemen in 2012. He also stressed that the government did not provide a suitable ground for the amounts given and for accelerating its absorption. He also explained that the economy is undergoing a serious stage.

According to an official source in the Prime Minister’s office, one of the reasons that caused donors to withdraw funds that they pledged was the lack of the government’s commitment to agreements. He pointed out that the main reason was the Houthi’s control of the country. The donor countries reported that financial support would be stopped due to the overtaking of the country’s institutions by Ansar Allah and their interference in its affairs. Furthermore, the anonymous source said that Gulf countries informed the resigned Yemeni government that they wouldn’t provide any support unless the Houthis withdrew from Sana’a as well as the other governorates that they took over. They also will have to prevent the Houthis from interfering in governmental institutions. In their last meeting, the “Friends of Yemen” and the Yemen government agreed on providing full support to the GCC initiative. The application will be in three fields: the political transition process, economic reform, and development and reforming the security and judiciary sector.

The resigned government has suffered financial hardship due to the deteriorating political situation and the prevention of foreign aid. Yemeni employees in governmental sectors fear the non-payment of salaries under the chaos and the presidential gap that the country is facing. The chaos happened as a result of the escalation of Houthis armed operations and takeover of the country’s institutions including the presidential palace.

Yemen has received 1.2 billion dollars from pledges provided by Gulf countries. Those pledges included an amount of 1 billion dollars as a Saudi trust manifested in the Central Bank of Yemen. A report issued by the Executive Bureau pointed out that the extra pledges that KSA has provided in 2014, which was an amount of 1.2 billion dollars, has been allocated. 435 million dollars were invested in the Social Welfare Fund, while the remaining amount, 800 million dollars, was dedicated to provide oil subsidies for citizens.

Yemen is suffering from financial pressures due to repetitive explosions of oil pipelines. Those operations are usually committed by tribes having issues with the central government. The result is a decreased amount of oil as well as the amount of export revenues. The resigned government has declared that the economy and the general budget suffered an approximate loss of 1.48 trillion dollars. This loss resulted from the continuous sabotage of the oil and gas pipelines and the electric networks during the period between 2012 and 2014.