Business

Yemeni Gov’t Battles to Prevent Total Collapse of Economy

Written by Staff

The Yemeni government is striving to retrieve the state institutions from the Houthi militia and supporters of the ousted President Ali Abdullah Saleh and bring the economy from the brink of total collapse.
The coup d’etat, mounted by the Houthis and their allies in early 2015, put in peril the livelihood of nearly 26 million Yemenis and exacerbated the already debilitated economy.
The serious economic and social situations prompted the legitimate government of President Abd Rabbuh Mansour Hadi to work out emergency measures with a view to preventing further deterioration.
On September 18, 2016, President Hadi issued a decree relocating the central bank from the rebel-held Sanaa to the temporary capital of Aden and replacing its board of directors.
The move was meant to prevent plunder of the cash reserves of the bank by the coup leaders and manipulation of these reserves to finance the war on Yemenis, economists believe.
The foreign exchange reserves of the bank depleted from USD 5.2 billion on the eve of the coup to less than USD 700 million in last August, according to government statistics.
The current cash is the remainder of a Saudi deposit amounting to USD one billion.
The illegal draw-outs made by the coup leaders from the central bank’s cash reserves in Sanaa and Al-Hudaydah governorates topped 450 billion Yemeni riyals (some USD 1.8 billion) in the last 18 months, Governor of the Bank Dr. Mansour Al-Qe’ity said.
“The government measures are based on the UN-sponsored economic truce meant to insure the impartiality of the central bank,” he made clear.
On a similar tone, Deputy Prime Minister and Foreign Minister Dr. Abdulmalik Abduljalil Al-Mekhlafi affirmed the government resolve to deny the Houthis access to cash resources and, in the meantime, stabilize the national economy.
“The government makes its utmost to ensure the payment of salaries to the civil servants across the country and channel the financial resources to the right directions,” he affirmed.
Yemen’s real GDP shrank radically from USD 13.3 billion in 2014 to USD 8.7 billion in 2015, which means a 34.6 percent decrease; the percentage is expected to go up by additional four points in 2016.
An official economic report attributes the shrinkage to the civil strife, waged by the coup elements, the suspension of foreign aid which topped USD 7.1 billion in 2012-2014, the freeze of investment activities, and the halt of oil production and foreign trade.
The state revenues nosedived by 53.7 percent last year while the budget deficit expanded to 15.4 percent of the GDP, which represents almost three times the 4.7 percent registered in 2014.
As for the annual per capita income, it declined from USD 723 in 2010 to USD 326 last year, according to a report by the Ministry of Planning and International Cooperation.
“This worrying level risks pushing more people below the poverty line and spiraling the already high rates of food insecurity and malnutrition,” the report cautions.
The inflation rate hit 30 percent last year and is expected by the World Bank to rise further this year while the purchasing power of the local currency versus the US dollar deteriorated by 40 percent by the end of last August.
“These figures indicate that the national economy has already entered a critical stage which is as serious as person being at an ICU,” Minister of Planning and International Cooperation Dr. Mohammad Al-Tamimi said.
“Faced by this worrying situation, the government developed a program for economic recovery in collaboration with regional and international partners,” he said, affirming that this program is almost complete.
Dr. Al-Tamimi called on donors to resume aid to Yemen and contribute to restoring balance to the macroeconomic indices.
Due to the conflict, nearly 21.2 million people, or 82 percent of the total population of the country, are now in need of aid to survive.
These include 9.9 million children, according to figures of the UN Office for the Coordination of Humanitarian Affairs (OCHA).
The OCHA put the number of internally-displaced Yemenis at 2.2 million in June, 2016.
The conflict also led to the closure of one out of each four private companies, thus rendering 70 percent of the workers jobless and pushing the unemployment rate to a record high of 60 percent.
More than three million workers have already lost their livelihoods since 800 contracting companies came to a standstill, the Yemeni trade union said, noting that the Houthis and their allies targeted thousands of industrial and commercial entities.
After the relocation of the central bank, the government is finalizing the arrangements for paying the salaries of 1.2 million civilian and military personnel who did not receive their salaries for more than two months.
After recapturing the oil-rich governorates from the rebel forces, the government implemented urgent measures to resume the oil and gas production and exportation which constitute 70 percent of the state revenues. (end) gb

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