Attempt to avoid violencePrice hikes delayed? [Archives:2004/705/Front Page]

January 22 2004

Hassan Al-Zaidi
A hike in prices of oil products in Yemen may be delayed to avoid possible violent confrontations.
Recent reports suggest that the National Defense Council is recommending the delay to the government.
The government has already decided to go on with other price increases, part of a long-term economic reform package prescribed by the World Bank.
It includes price hikes to be implemented in the first half of this year.
Public response to the minor rise in wheat and other commodities prices was discussed in a recent meeting with the defense council and government, and the potential influence of such price hikes unrest in the country.
Several security measures were proposed to maintain security.
Security forces
The government is expected to carry out intensive precautionary security measures before the actual implementation of the next stage of the price reform, which will cause an increase in oil-derivatives including benzene and diesel for the second time.
It was in 1997 when violent demonstrations took place in the streets in protest of the rise in fuel prices at the time.
The protests had caused tremendous damage to stores and public areas as security measures by then were not adequate.
Meanwhile, tension is rising every day due to the increase of prices of basic commodities, despite the government's claim that external factors were behind this price hike.
The government was harshly criticized by religious and opposition leaders throughout the country lately, who called the latest rise in prices a means to 'steal food from the mouths of the poor'.
Renowned Sheikh and opposition leader Abdulmajeed Al-Zindani claimed that those who are keeping silent against this rise are “disbelievers in Dooms Day”.
Sixth dose in a row
If it is to be implemented, the dose will be the sixth in a row since the government started implementing the economic reform package set by the World Bank and other international bodies, supposedly to help Yemen's economy recover and bring new sources of revenue to the budget.
The dose is being called the “fatal” dose, as many observers believe any price hikes at this particular time will have grave results on the poor, who are barely surviving.
The government says the increase is essential to carry out the economic reform package in a proper manner.
According to a source at the Ministry of Planning and International Cooperation, the dose will be vital in providing Yemen with extra revenue to carry out its projects. The source added that $2.3 billion is needed to cover the cost of strategic projects and programs to reduce poverty for 2004 and 2005.
Yemen was initially in need for $5 billion to initially start implementing its development programs, which will need tens of billions of dollars to achieve fully.
Furthermore, Yemen was so far only able to secure $380 million in terms of loans and $140 million in terms donations. It is expected that donors will continue to provide the government with further funds in the years to come, but the government is still aware that without economic reforms, the country's economy will not develop according to plans.
Three-step process
Governmental sources say that the economic reform program will continue this year in three basic steps.
The first would be to let prices rise in basic commodities including wheat and sugar, and will not provide any subsidies despite any possible local pressure.
The second step is to go ahead with the planned hike in prices of oil-derivatives, which will include a 50% raise in benzene prices and a similar increase to diesel prices, which will in turn raise prices of most other commodities and services.
The third step is to implement the 10% extra sales taxes on all businesses in the country, which will also lead to the rise of prices, but which will provide the government with sustainable income.
It is hoped that the three steps would be implemented smoothly without any disturbance or violent reaction from the public or the business community.
Howevever, the government's decision to go on with these steps in the economic reform package is not 100% confirmed, and hesitation to take such steps are quite visible in the responses of the government when asked about them.
Last week, Yemeni Prime Minister Abdulqadir Ba Jammal attributed the increase of prices of commodities to global factors, and gave the impression that the government is working to minimize suffering of citizens and not taking measures to raise prices, which contradicts with the government's plans to raise its revenues from oil.