MPs accuse government of hiding returns of 25 million oil barrels [Archives:2006/1008/Front Page]

December 18 2006

Mohammed Bin Sallam
SANA'A, Dec. 16 ) Three parliamentary blocs last week accused the Yemeni government of lacking transparency regarding estimated oil returns and further playing around with more than 25 millions barrels of exported oil.

Following passage of the budget project, the opposition blocs – the Yemeni Reform Party, the Yemeni Socialist Party and the Nasserite Unionist Party – released a mass media statement last Wednesday highlighting their views on the 2007 budget.

The release declared, “The 2007 budget project was approved while a majority of Yemenis live below the poverty line and are illiterate. They also lack basic services such as electricity, water and health care. Further, unemployment rates are more 45 percent and increasing daily to the point where we're on the verge of a catastrophe at social, economic and political levels.”

The statement went on, “There's agreement about economic and social priorities inside and outside Yemen. The recent London donors conference revealed the government's failure to treat the deteriorating situation in Yemen.

“The budget should address the economic situation, including poverty and combating unemployment, improving education services, supplying clean water and electricity to all citizens and carrying out infrastructure projects, as well as increasing investment expenditures in such a way that revitalizes the nation's economic situation and improves the investment environment.

It continued, “What is distinct about the 2007 budget is its great ambiguity regarding announced figures and policies. The government is attempting to mislead Parliament in the following ways:

1. The government's financial statement policy is contradicted by figures shown in the budget. Despite advocating clarity and transparency, the figures contradict the financial statement. The estimated oil exports were fixed at 41 million barrels at $55 per barrel with total returns of YR 443 billion; however, actual figures for January-October 2006 reveal that the Yemeni government exported 55 million barrels. Thus, 2006 oil exports would be 66 million barrels, which means YR 270 billion wasn't included in the budget.

2. The financial statement mentioned government's tendency to develop non-oil revenues; however, this wasn't reflected in the figures, as 70 percent of revenues were from oil. Additionally, the predicted increase in returns was nothing other than fixing the 2007 oil price at $55 per barrel instead of $40 in 2006 and exchanging the U.S. dollar at YR 196 instead of YR 185 in 2006, so the increase wasn't due to actual economic activity.

3. Although the budget project was presented to Parliament after the London donors conference, wherein Yemen received $4.7 billion in easy loans and grants, the 2007 budget doesn't reflect this number. Instead, loan returns decreased from YR 62 billion in 2006 to YR 58 billion in 2007.

4. The immense vagueness of the budget figures reflect the Yemeni government's hidden intention to play around with the figures under names like “Unclassified Expenditures,” etc., which contradicts transparency and basic accounting principles. Figures under this classification were YR 269 billion, or approximately 16.5 percent of the total budget.

Further, bulk amounts were cut from centralized allocations, which were YR 736 billion or approximately 45.3 percent, clearly indicating that the government lacks vision. Further, there's no avail to having a budget with numerous shortcomings.

5. The budget deficit is increasing annually, thus opposing government allegations that it is attempting to reduce the deficit, which was 5.18 percent of Gross Domestic Product in 2006 and 4.29 percent in 2005.

6. The government budget tends toward current expenditures at the cost of investment expenses, which amount to YR 301 billion of total GDP or an 18.5 percentage. This means more poverty, unemployment and economic recession.

7. Although they are sectors upon which development relies, there has been a noticeable setback in allocations for education and health. Education allocations decreased from 21.8 percent in 2005 to 15.6 percent in 2006 and 11.7 percent for 2007. The same is true for the health sector, whose allocations decreased from 5 percent in 2005 to 3.9 percent in 2006 and 3.3 percent for 2007.

Such decreases come at a time when the nation is witnessing increased illiteracy among citizens, deteriorating educational outputs and teachers not being paid enough. The health sector has deteriorated further regarding facilities and personnel, as well as medicine.

Such deterioration invites the Yemeni government to increase allocations for these two important sectors, but instead, the opposite occurred. Further, the rights of these sectors' employees weren't met according to Parliament's salary strategy.

8. Opposition repeatedly warned about the risks of foreign and national loans upon Yemen's economy, particularly when there's no capable management to administer such loans. Thus, the negative effect of such a policy has surfaced, with huge amounts deducted from budget allocations to settle these loans, which are increasing annually.

Further, approximately YR 22.5 billion is deducted annually to settle foreign loan installments. Servicing such debt amounts to YR 118.7 billion, representing approximately 7.3 percent of budget expenditures.

9. Despite the budget's immense shortcomings, another budget actually is implemented, according to Central Organization for Control and Auditing reports and final statements, because many projects were implemented outside the budget.

Member of Parliament Ali Ashal, a member of Parliament's oil and development committee, accused the government of playing with 25 million barrels of oil exported (equaling $1.5 billion) and not including them in the 2007 budget.

He added, “The government's 2007 budget presented to Parliament wasn't transparent about estimated oil revenues. Setting oil prices between $50 and $55 is floating and is unworkable for deciding the oil portion of the budget, which is 75 percent.”

Ashal told Al-Nida newspaper that the report of the committee responsible for discussing the 2007 budget was one of the worst ever submitted to Parliament. “Unlike past reports that attempted to provide an objective and scientific criticism for budget projects, the most recent report contains a lot of flattery for the government and the 2007 budget, although it's full of shortcomings,” he noted.

The opposition statement criticized increased 2006 expenditures on commodities, services and belongings, which reached YR 260,210,181. It also referred to hosting allocations amounting to YR 5,915,890, thus indicating that the Yemeni government wasn't committed to rationalizing expenditures.

The statement also declared that the 2007 budget amount assigned for dams is YR 728,942 million, decreasing YR 210,618 million from last year's estimates. Such a small amount doesn't begin to cover the pressing needs for more dams and water barriers.