Budget for January to June 2004Yemen’s payment balance achieves surplus [Archives:2004/786/Business & Economy]

November 1 2004

An official report indicated that the Yemen payment balance achieved a US$122.5 million surplus (2 per cent of the gross domestic production) in the first half of the year 2004, while it was US $299 million (5 per cent of the gross domestic production) in the same period of the last year 2003.
The report ascribed the surplus to in the payment balance to the flow in the current account that reached $123 million in the first half of this year comparing with the $112 million of the same period of the last year. A 2 per cent surplus in the current account was achieved in the gross domestic production in the first six months of this year. It is nearly the same average registered in the same period of the last year.
On one hand, there's a $164 million surplus in the commercial balance in the first half of 2003 and $ 287 millions in the first half of this year and, on the other, the net current remittances receivables, governmental and non governmental, raised by 3 per cent. The deficit in the services balance increased by 8 per cent during the same period as a result of the rise in transportations, insurance and constructions payments.
The report of Central Bank of Yemen pointed out that the deficit in the income account made a 3 per cent rise reflecting the increase in the payment of the direct foreign investment revenues and the decrease of the other investments' revenues. The capital account was transferred from a $118 million surplus in the first half of 2003 to a $45 million deficit in the same period of 2004. That's basically the outcome of the rise in the commitments of paying the loans' installments and the increase of the oil commercial facilities that are presented in a short termed way.
The payments balance achieved a $335 million rise (3 per cent of the gross domestic production) in 2003 though the international conditions were suitable to bring about big rise because of the high oil prices that were influenced by the American occupation of Iraq. But it is noticeable that the surplus in the last year in less that those of the previous years.
According to the report of the economical expectations and studies sector in the ministry of planning and international cooperation, the surplus in the payment balance is getting worse every year. Instead of $1.4 billion in 2000, it became $653 billion in 2001, 597 billion in 2002 5.8 per cent of the gross domestic production), and 335 billion in 2003. The report stated that the decrease of the surplus in a number of the balances that are related to it, which are the commercial balance and the current account besides the effect of the big rises in the transportations, insurance fees of the goods that arrive in the Yemeni ports on the services balance.
There are a number of factors that contribute to deteriorating the surplus in the payment balance and its components: relying on importing to satisfy the local demand for the majority of goods and services, the weak economy to export, the international rise of the consumption goods and the increase in the revenues of the oil companies working in Yemen the are transferred abroad.
The report that was issued in the middle of the five-year plan (2001-2005) indicated the effect of the frequent lowering of the real gross domestic production on increasing the income in making the policy of free trade on the economic condition. The rise in oil prices is the main factor for the deficit. Besides that, the transfers of companies from and to Yemen as well as the interests of these transfers have an effect on the payment balance. This is what makes us induce that the factors having an external dimension control the state of the payment balance. As a result of that the national economy becomes highly sensitive for the external changes making it negatively influence the sustainability of development. These indications confirmed the success of the Yemen economical reforms and the monetary policies they are followed by the government in spite of the challenges it faces.