26 SEPTEMBER: Sanaa weekly, 25-6-98. [Archives:1998/26/Press Review]

June 29 1998

(Yemen Armed Forces)   Main Headline:
1- The President: “Infiltrators crept into the demonstrations to divert them into acts of rioting and destruction.”
“We have covered a big stage in the border talks with Saudi Arabia, aiming to reach a final settlement satisfactory to both sides.””It is very astonishing to the stick methods used with Arab countries, while generous rewards are bestowed on Israel.”2- The Council of Ministers endorses the inclusion of the poverty alleviation project within the Social Safety Net, at a cost of $40 million with contributions from international donor organizations.
3- Minister of Interior: “Rioting has left 5 dead, 12 injured and extensive damage to property. Preliminary investigations have revealed that certain political parties were behind the unrest. The President ordered the release of all detainees.”
4- Minister of Planning: “Half of the oil revenue goes to subsidize wheat and flour.”5- Minister of Agriculture: “Price reform will help support Yemeni farmers, and, hence increase their capabilities to support food security.”6- Governor of Aden : “Development projects in Aden cost more than YR 1.5 billion.)
Article Summary:
Why the Price Reform?
By Ibrahim Al-Ashmawi
The 2nd Gulf war and the return of a million Yemeni immigrants who used to send more than $1 billion a year presented a powerful blow to the Yemeni economy. Following the 1994, the balance of payments deficit rose to $760 million, the individual income growth became zero, employment rose to 35%, and the state’s revenue covered only 80% of its employees’ salaries.
Due to the general regional and international conditions, there were not many alternatives open for Yemen. Donor countries met in Paris and Brussels in 1996, and decided to provide a loans worth $550 million and later on $1.8 billion. They also decided to cancel 80% of Yemen’s foreign debts.
To remedy the deteriorating economy, drastic measures were needed. The reform program called for a gradual lifting of subsidies off some basic food commodities and fuels. This is essential for stopping the rapid depletion of national revenues and hard currency reserves.
Reforms proceeded swiftly. Budget deficit and inflation were brought to all time low and kept under control. The 1998 budget was drawn on the valid assumption of an oil revenue of $1.5 billion (oil revenues form 65% of the overall national revenue). However, world oil prices dropped from $18 to $13 per barrel, depriving the Yemeni treasury of a precious $236 million. During this year the imports bill totaled $307 million, compared to $128 million in 1997.
The budget deficit rose from a projected YR 4.4 billion to an actual YR 36.2 billion.
Price reforms were scheduled to start in a gradual manner from January of this year. However, political circumstances within the government delayed that. Price hike cannot be described as a great achievement, but a bitter drug that must be administered.