Financially, Yemen had a disastrous year in 2011. Not only did its economy shrink by around 10.5%, but it also experienced a series of violent protests against its then-leader, Ali Abdullah Saleh. All this in addition to the emergence of apparent links to al Qaeda. Locals in the capital, Sana’a, endured rocketing prices on everyday items such as groceries as a result of the turmoil. Even water reached prices of up to three times more than normal. Many domestic water systems failed and people were forced to pay the sky high prices if they wanted to survive. Fuel was scarce and gas supplies were commonly being cut off due to people’s inability to pay the high rates.
Yemen’s financial state had long been spiralling out of control. The president that people protested so strongly against had been neglecting the country for many years. However, the protests only made matters worse for the economy, which continued to decline to a state of dire straits.
The year 2012, however, brings a fresh new hope to Yemen. Although its deep political issues and worrying security woes continue, the country predicts that it will achieve a two per cent growth this year. In comparison to last year’s figures, this is a huge step forward. The country owes its first steps of recovery to the Arab Monetary Fund (AMF). Yemen has, to date, taken 24 loans from the AMF that total more than $1 billion. It is the AMF’s two most recent loans to Yemen that are putting the country back on the map; it has one loan of $110 million to finance its balance of payments, and it has a second loan of $95 million that will help reform its economy.
Aside from making moves to deal with the country’s huge budget deficit, which stands at around two and a half billion dollars, Yemeni authorities are taking active steps to recapture territory from extremist militant groups. This has been another significant contributor to the country’s woes; with the growing violence came an overwhelming sense of disorder and disarray. Although the Yemeni citizens got what they wanted – the end to Saleh’s 33 year reign of power – his resignation couldn’t come soon enough. In November last year, the then-President stepped down from his position. However, he announced that he would stay in power until a successor was found. This led to a bomb attack on his palace; the dictator was then forced to give up the comforts of his Broyhill furniture and luxurious surroundings, instead swapping them for a hospital bed. It seemed that the attack, along with a deadly nine months of violent protests, was enough to persuade him that stepping down quickly was the right thing to do.
Although the International Monetary Fund (IMF) predicts a 0.9 per cent contraction for the 2012 Yemeni economy, things are definitely looking up for the nation. It plans a $10 billion emergency budget for 2012 and 2013, and has put additional plans in place to clear the deficit of $2.5 billion by borrowing from the AMF, the IMF and the World Bank.
In addition to these loans, Yemen has raised other funds to help drag it out of financial turmoil, including raking in $4 billion in aid funds from Western and Gulf states, which are all in the process of handing their contributions over to the Yemeni authorities. It also added a further $230 million to the recovery pile from its Islamic banks over an issue with bonds.
With the election of a new President earlier this year – Abd-Rabbu Mansour Hadi – there are widespread hopes and beliefs that the country is likely to recover from its financial turmoil. One thing is for sure, Yemen seems to have a strong network of support from surrounding nations.
The AMF’s chairman, Mr. Jassim al Mannai, voiced his own hopes for the country. He said: “We are optimistic since the political dispute is settled. There is going to be political transformation and more focus on the economy.”
For a country that depends heavily on dwindling oil resources, which account for around 25% of the country’s GDP and 70% of its government revenue, Yemen has done well to diversify its business operations. As oil continues to decline, much of Yemen’s investment loans will be poured into initiatives that will aim to further non-oil industries.
Yemen is making all the right moves towards an economic recovery. How well will they fare? Only time will tell.