To avoid violence and chaosSaleh postpones price hike [Archives:2004/747/Front Page]

June 17 2004

Mohammed bin Sallam
President Saleh announced last Saturday June 12 that the decision to halt government subsidies to oil derivatives, expected to become effective early this month, has been postponed until the improvement of the situation.
“The lifting of subsidies on oil derivatives has been postponed until our situation improves. If the World Bank and International Monetary Fund understand that, we would be pleased, otherwise, it is still a sovereign issue in our hands. The whole development operation is not in the hands of the Fund and the World Bank, but they are guides. Sometimes they are right and sometimes they are wrong, and not all of their decisions are correct, there are special situations for each country”, the President said.
Yemen through the postponement to lift 600 million USD of government subsidies in oil derivatives is trying to avoid violence and chaos in the manner of those that took place last month in Lebanon, which resulted in a number of dead and injured following an increase in oil derivative prices.
United Press International previously reported that the Prime Minister, Ba Jamal, during his meeting with Mr. Christian Poortman, Deputy President of the World Bank, had confirmed that his government would begin lifting subsidies on oil derivatives within the framework of economic reforms, as of June of this year
The source explained that the Yemeni commitment to international cooperation came after warnings of the possible drop in Yemeni oil production from the plans and the effect on development programs in the long term.
The World Bank and the Fund threatened last February to suspend their cooperation with Yemen as the Yemeni Government does not abide by its commitments regarding administrative and financial reforms, particularly the increases in the prices of fuel and other oil derivatives. The officials at the bank and the fund complain of the slow pace of reforms and prevalence of corruption in the government apparatuses and of the weak mechanism for utilizing loans. The percentage benefiting from loans does not exceed 40%.
Mr. Ahmed Mohamed Sofan, Minister of Planning and International Cooperation, stated previously to various media organizations that Yemen imports two thirds of its consumption of diesel at a price of 50 Riyals per liter and sells it to the public for 17 Riyals per liter. Consumption has increased from 70 thousand tones to 148 thousand tons from 1998 until now. The Minister admitted the negative effects of reforms on agricultural costs and production and the difficulty of easing the effects of this increase.