2005 budget:Economic contraction with no development [Archives:2005/805/Business & Economy]

January 6 2005

By Eng. Mohsen Ali Basurah
Member of Parliamentary Agriculture and Fish Committee
For the Yemen Times

The government is asked by constitution to present at the end of each year an annual financial statement including basic policies and main indicators of the general budget and its annexes.

The one who looks wisely at the submitted budget will realize that it is not a real one. Its financial statement claims that it was based on maintaining what has been achieved in the financial, economic and administrative reforms and it will go on applying the development programs that meet ambitions. It claims that it is going to reinforce the responsibilities of the local authorities making them play their role effectively in the extended local development and will open vast scope for participation in the development of the private sector.

All countries, including the third world countries, know that budgets are not to be prepared on false basis and predictions. They should be based on real and precise data and each budget aims to make an economic development in all fields especially the productive ones in order to raise the per capita income average.

The financial statement showed that the targeted average gross domestic production for the year 2005 is %4.1. This figure lacks a sense of reliability. The government confirms that the 2004 average gross domestic production was %3,57 which was lesser than that of 2003 which exceeded %4,47. The government said this deterioration was attributed to oil depletion and decrease of its price by %8.6 although it didn't take into consideration the rise in its price in 2004. It didn't point out that the price of the oil barrel rose in 2004 from US$22 to US$ 46 a barrel. The parliament however recommended frequently making use of these changes and save money not for the necessary requirements and narrow limitations but for presenting an additional allotment.

Regarding unemployment, the financial statement doesn't mention its target this year. The 2004 statement mentioned that unemployment average was 10.6 and this figure is also questionable because many impartial statements indicated that unemployment reached 40%. The inflation average in 2003, 2004, and 2005 reached %10.8, %11, %10 respectively. These are the government's figures though the impartial economic reports indicated that the inflation average exceeded %14.7. since the government depends for most of its income on oil that formed %67 of the overall income, despite local and international warnings that oil is getting exhausted. Al-Masilah, Mareb and Al-Gawf fields that form %70 of the local oil are getting exhausted yet the government doesn't apply any actual procedures to diversify the income resources and to protect our homeland from external shocks.

The 2005 budget neither fights poverty nor provides job opportunities. It doesn't improve the income and it neglects its social function when we find %50 of people are beneath the poverty line. The social insurance network doesn't help in this respect because its payment is estimated at US$ 30 per three months and its strategy is incapable to solve this problem: in most rural areas, political exploitation is found to be practiced to buy the poor people's political loyalty.

The budget doesn't play its role significantly causing the crime record to get increased. The public property's crimes in 2002 were 199, yet in 2003 reached 1340 and the crimes related to private properties were 6773 while those against people exceeded 10269, burglaries were 766 and there were 865 cases of stores' robberies. The registered cases of committed or attempted suicide were 247 in 2003 as it's unveiled by the statistical book.

In turn, education and health get low allotments though there is namely rises in the budget: education allotments for 2004 was 162,7 billion and now, in 2005, it is YR 177 billion by a 14-billion rise (%8) because the prices increase by more than % 17. Health sector got YR 35.5 billion in 2004 but YR 42,5 billion (with increasing YR7 billion achieving not more than a %17 rise). This doesn't go in harmony with the price rise as well as the disease average such as malaria, and liver virus.

In the sector of security and defense, the rise reached YR19 billion though there is an internal and external stability. It is wished this rise was devoted for staff members of the Armed Forces and Ministry of Interior staff whose salaries are the least of all.

Whoever has a look into the statistics of education and health will be sure that the social function of the budget is getting worse: %47 of the population aged 10 and above are illiterate; %24.3 can only read and write without any qualifications; %9.4 are in the primary education; %9.2 are in the preparatory level; %7.7 are in the secondary education; and %1.9 are in the university level.

The mortality rate in 2003 reached 13011 deaths of children while malaria had affected tens of thousands. The various types of liver virus had affected more than 2 millions. It is worth mentioning that there is an average of one bed for every 65 thousand people.

Marriage average is also getting lesser and lesser: 10934 marriage cases in 2002 but in 2003 there were only 6000.

Concerning the administrative reform, the budget didn't achieve anything. The central and local administrative reform failed during the past years; the imaginary jobs are still as they are and fight against the corrupts haven't been realized yet. The reports of the Central Organization For Control and Auditing (COCA) revealed many corrupts whom haven't yet been summoned by the Public Prosecutor though they owe millions to public corporations. They haven't been sued.

There were some amazing stances. The oil establishments road in Hodeidah (one kilometer long) was done at YR 302 million while it actually costs no more than YR 20 million in other places. There is also the scandal of the sale of oil block 53 for US$ 12 million while the actual price is not less than US$ 200 million. Despite all this corruption, there's no auditing. The government confirms that the liters of diesel smugglers are known and they smuggle hundreds of millions of liters of diesel. However, Minister of Interior came to the parliament to say that they are fishermen and they smuggle diesel with barrels on their boats. They don't mention those who smuggle huge weights on ships and where from they bought them and through which ports they smuggled. If those fishermen were the only real smugglers of diesel, we would have abundance of diesel next year. This is not true of course because smugglers are still doing so. Any administrative reform requires a strong determination not tribal leaders without responsible administration.

Moreover, the financial statement doesn't point out that there is a national strategy for salaries though the employees have been waiting for a long time. The parliament's frequent recommendations in this respect are no longer accepted. Such a strategy becomes a must at this time because the least salary an employee should receive to secure his/ her daily livings is YR 50,000. At the time the employee is looking forward to increasing his income, the government insists on increasing the amount of suffering on his shoulders when it lifts the subsidies on the oil derivatives and raises taxes.

What is allotted for the local authority's investment is a little allotment, that is,YR 25 billion. Let's have some examples for that: it is decided that Sana'a province will get YR 801 million, Taiz will have YR1.750 billion, Hadramout is to get YR1.527 billion and Raymah will get YR 282 million. These are simple figures because they don't fit either for roads, health, education, water tc. Or they are for the suspended projects. If YR 350 million is to be given to Al-Wahda Hospital in Al-Dhale'e yet the annual allotment for this project was decided to be YR 10 million. That means the project will be completed after 35 years. Is this the entire development?

The vice-minister of public works confirmed that the tenders are not offered to the contractors because the annual allotments are too few. They are executed directly and the harms of such an act is known; it is not the illegal act that's meant here but the carelessness in dealing with contractors and neglecting their rights. There are many complaints in the parliament. There is a contractor who completed his work and he is asking for7 billion of his rights of which he had got just a billion. Another one was contracted by the local authority to execute a road but as soon as he started doing his work the ministry signed another contract with another contractor. You may find two foundation stones for this road: one is by the local authority and another by the ministry. How numerous are the contractors who come and go to the ministries of finance and public works at the present time. The local authority's duties determined by the government are not practiced in reality. This made an official in the government say at the Local Councils Conference that they are not but talks celebrations since the recommendations of all the three conferences have been absolutely ignored. The administrative function of the budget has been yet achieved in the light of the allotments and obstacles as well.

The financial function of the budget does reveal that the government relies on oil, then on taxes and customs and the internal and external loans. It neglects many promising sectors such as fish, agriculture, and tourism. Therefore we find the government's share of the interest surplus from the agriculture and fish sectors that exceeded YR92 million. The government has specified YR400million for dams and water barriers for 2005.

The loans that Yemen received, some US$ 290 million, were divided into the following: US$19 million (equivalent for %6.5 of the total) was devoted for agriculture; %1.9 of the total expenses while Jordan gives %3.5 of the overall expenses for agriculture while we find that Egypt allotted %10. These simple expenses on being supported by the dry lands made the agricultural average decrease even in grain plantations: the hector produces only one ton while in north Africa it is 4.6 tons. The agricultural average lowered to %3.9 though was planned to be made at least at %6. This is proved when we see the degradation of the agricultural lands and the self-sufficiency of grains decreased from %31 to % 21 and grain imports were increased to reach %79.

Therefore, the oil revenues though it presents danger on the budget, it shows the unreliability of the figures. The government's indications about prices and dollar's value that is somehow stable are not good. The taxes and customs didn't increase but a little equaling the increase of the salaries of employees. The customs and tax evasion is notable and it makes the budget lose billions of riyals especially when the tax collectors are not competent and responsible enough in the money collection administrations.

The conclusion is that the 2005 budget doesn't apply its basic functions either the social, administrative or economical ones, as well as the military and security function. This budget deepens the economical inflation. I'll leave at last to the reader to judge whether it is a development-based or economical inflation budget.