Arab funds to Yemen,More than $1 billion in loans [Archives:2003/636/Business & Economy]

May 12 2003

Yemen's government headed by Mr. Abdulqader Bajamal is facing the problem of funding development plans that have been moved from last year or those floundering projects owing to the state budget deficit. This situation would force the government to resort to continue borrowing policy from Arab and Gulf Funds, donor countries and the World Bank. While the opposition parties criticize fiercely this policy, saying it is flooding the market with loans interests, government sources confirm it is necessary to meet needs of local development and operating projects that have been idle for long time. A government report mentioned that Yemen obtained last year about $ 200 million in loans from the Arab fund for economic and social development and the Saudi fund for development and the Kuwaiti fund. The report has made it clear that those funds would offer Yemen in the years 2003-2005 around $ one billion and 127 million for the implementation of the ongoing five-year plan that ends in 2005.
The Arab Fund for Economic Development (AFED) contributes to financing a number of projects covering transport, communications, ports, power, water, sewage, and sectors of agricultural production and irrigation. This fund is considered of the most important Arab funds that fund development projects in Yemen and it has offered around 64 loans amounting to $ 1.044 billion out of which only $682.6 million has been spent.
One of the gigantic projects the AFED is funding is the construction of power carrying lines from Marib to Sana'a at a cost of 30 million KD and also assisting the Social Fund project with 15 million KD. The AFED had during Paris conference of donor countries held at the end of last year pledged to grant loans to Yemen worth $200 million during the period of 2003-2005. On its part Yemen has presented proposals to the fund for financing projects of roads, health, electricity, sewage and those for alleviating poverty. An official report mentioned that the Saudi Fund for Development, since resuming its activity in Yemen in 2001 and after rescheduling Yemen's loans, offered three loans totaling 375 million SR. also in 2002 it offered two loans to Yemen, one of 187.5 million SR to support a project of building technical institutes and vocational training centre and the second 22.5 million SR worth for a project of road engineering services. At the donors conference the Saudi fund promised to offer $ 300 million for the implementation of development projects at $100 million a year during the period 2003-2005.
Since 2001 the Kuwaiti fund resumed its activity in Yemen and in 2002 an agreement was signed between the two countries for amending the previously loans and to begin signing new agreements. The Kuwaiti Fund promised offering $227 million to contribute to financing a number of development projects in Yemen at an annul rate of $67 million in the period 2003-2005. According to the government report the International Body for Development tops the list of the creditors that in 2002 gave Yemen $ 4.9 million while the development body offered $176 million.
Opposition parties make large-scale political criticism against the borrowing policy saying the government can make money from local sources and follow an austerity policy for implementing floundering projects instead of sinking the country in debts. The government says, however, that it could not implement development projects without the help of borrowing, especially in building vital projects such as water takes about %37.5 of total loans and power sector that consumes %24.5 of them. So the government seems to be insisting on following this way but the critics have to understand the necessity of depending on loans to finish the floundering projects.