Yemen’s economy floundering due to mismanagement and corruption, says report [Archives:2008/1142/Local News]

Jamal Al-Najjar
For Yemen Times
SANA'A, MARCH, 30 ) Economic experts warned that Yemen is still suffering from serious economic problems that make it among the 20 least-developed countries in the world, according to economics researchers from the Economic Research Forum (ERF) and the Yemeni Ministry of Planning and International Cooperation.

Economy experts from Yemen, Egypt and the United Arab Emirates presented a report at a seminar on Saturday reaffirming that Yemen's economy – heavily dependent on oil, agriculture and investment – continues to face obstacles, including a decline in oil production, inflation, currency devaluation and poor financial policies, which dampen the country's financial and social outlook.

The report emphasized that the impending decline in oil production associated with depleting revenues are considered one of the main challenges facing Yemen's economy in the foreseeable future. The sum total of proven and probable reserves now is expected to last for only eight years at the current rate of production. New oil discoveries can help slow the decline in production but cannot eliminate it. Concerning the financial system in Yemen, the report showed that it is still under-developed and plays a limited role, particularly in the banking system, which is dominated by the Central Bank of Yemen.

The central bank has been following a passive monetary policy that has limited effectiveness. The absence of monetary instruments compatible with Islamic modes of financing puts almost half of the banking system's liquidity out of reach of the current monetary policy.

The report explained the reasons that created such difficulties.

According to the report, following unification in 1990, the economy suffered several setbacks as a result of local and international changes beginning with the first Gulf War in 1991 and the Yemeni civil war in 1994, which consumed the country's finances.

The Yemeni economy also stagnated between 2001 and 2005 due to regional and international developments after the events of September 11, 2001, the U.S. 'war on terror' and subsequent invasion of Iraq. Abdul Bari Al-Shajabi, professor of economics at Sana'a University, revealed that financial and administrative corruption, coupled with the extravagance with which the public budget is spent, are the real causes behind the major economic crises in Yemen. Al-Shajabi made clear that he meant the term “crises