Yemen Economic Update Is a Quarterly Report That Consists of Five Sections
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YYEEMMEENN EECCOONNOOMMIICC UUPPDDAATTEE Yemen Economic Update is a quarterly report that consists of five sections. The first section highlights major economic and policy developments. The second section provides “flash indicators” for key economic variables that are available on a monthly or quarterly basis from the Government of Yemen. The third section uses different data sources to compare one development indicator in Yemen with other countries in the MENA region and countries with similar GDP per capita and population. The fourth section summarizes new legislation, publications, data, conferences, and donor activities. The fifth section SUMMER 2003 provides contact information and recent World Bank operations and activities in Yemen. Occasionally, special topics are featured in the Update. Economic and Policy Developments (i) Key Policy Developments: For the third time in the post- Inside this Issue unification era, Yemeni citizens cast their vote in the Parliamentary 1 Economic and Policy elections on 27th April 2003. The Developments elections were characterized by large http://www.althawra.gov.ye/ voter registration (particularly among women), large voter turn-out (76% of 3 Flash Indicators total registered voters), participation human rights. A new Ministry for of all political parties, lack of violence Water and Environment was created Special Topic: The and considerable international and while culture and tourism were 6 Tobacco Sector in local monitoring. merged into a new ministry. In Yemen addition, 10 ex-ministers were The ruling GPC party retained its appointed to the Shoura Council and a Yemen Compares: majority in Parliament by securing former member of the Presidency and Tobacco 10 more than 226 seats of the 301 total former secretary-general of the Yemen Consumption seats. The Islah party (45 seats) was Socialist Party, Mr. Salem Saleh Mohammed, was appointed as an What’s New the second largest party in Parliament 11 advisor to the President. followed by the Yemen Socialist Party (7 seats). About 14 independent candidates also succeeded in the During the celebration of the Bank’s Operations 14 elections. unification day (22 May 2003), President Saleh issued a general The newly elected Parliament held its amnesty for the remainder of the 1994 15 Bank Missions first session in early May when all Civil War leaders. The amnesty, which members took the oath and then voted was highly praised domestically and for the Parliament Speaker and the internationally, covers the 16 leaders 17 Contact Information new Board. Sheikh Abdullah bin against whom there were court Hussein al-Ahmer was re-elected as sentences. the Speaker of Parliament. The Parliament also selected its former President Saleh mandated the new Board (Deputy-Speakers) for the new government to focus on the following four priories: (i) continuation of the The World Bank Parliamentary session. Members were economic, financial, administrative Group, Sana’a Office also assigned to specialized and judicial reform processes; (ii) parliamentary committees. fighting poverty, unemployment and Social and Economic Development Mr. Abdel Kader Ba-Jammal was promotion of investment; (iii) Group (MNSED), Middle East and reappointed as Prime Minister and he development of the education system North Africa Region. and its utilization in the development http://www.worldbank.org.ye/ formed a new cabinet in May 2003. Prepared by Nadir Mohammed, Mohammed The new cabinet included 18 new process; and, (iv) i improving security Al-Sabbry and Maria Handal. ministers and a female minister for and domestic stability. improving in the For more information about items in this Update contact Mohammed Al-Sabbry ([email protected]), the World Bank Office, Sana’a . SUMMER 2003 The new Cabinet presented its program to The exchange rate depreciated rapidly in January- Parliament on June 7th. In addition to the February 2003. It has since then stabilized at about implementation of the Second Five-Year Plan and the US$/YR 183. In the meanwhile, foreign exchange Poverty Reduction Strategy (PRSP), the program aims to reserves continued to build-up in the second quarter of realize a 4.7% growth rate in non-oil sectors, reduction of the current fiscal year. By end of May 2003, the country’s poverty by 13%. It also emphasizes the continued support total external reserves reached US$ 4.7 billion which to the decentralization process, enhancing the role of the cover more than a year and half of imports of good and civil society and women in the development process, services. upgrading of the education sector and promotion of investment and private sector initiatives. Recent estimates of the balance of payments in the first quarter of 2003 show that the trade balance recoded a The new Government program stressed the surplus of US$ 157 million (compared with US$ 93 importance of the administrative, financial and million in Q1 of 2002). However, the balance of the economic reform program as well as ensuring current account declined to US$ 79 million (compared political and social stability and preserving domestic with US$ 92 million in Q1 of 2002) due to the increase in security. More efforts towards curbing corruption the deficit of the services balance and the income balance. and strengthening the social safety net will be The net current transfers (mainly workers remittances) undertaken. The program puts more emphasis on improved in the first quarter at about US$ 317 million. the “promising sectors” and focuses on legal and judicial reforms. Other sectoral targets in the (iii) Other Economic News: government program include raising telephone connections to cover 3 million lines by 2009, raising · Aden Free Zone is currently paving with asphalt electricity coverage to 60% of total population and 6,000 meter roads in Aden governorate. It also reduction of losses to 20%. allocated 32,000 hectares for a zone for heavy industries. (ii) Economic Developments: · TransGlobe Energy continues exploring for oil GDP growth is estimated at 2.9% in 2002, down wells in Block S-1. from an average growth rate of 4.2% in the two · UNDP and the Ministry of Planning and previous years. The relatively slow growth was due International Cooperation (MoPIC) signed a to lower than expected growth in the quarrying and grant agreement with a total amount of US$ 3.1 mining sectors as well as manufacturing and public million for financing PRSP implementation. The utilities. The Government projects a growth rate of World Bank and Oxfam (UK) will also contribute 3.9% in 2003 and actual outcome will largely depend funds to MOPIC during 2003-2006. on the performance of the oil sector and acceleration of economic activities in tourism and transport · The US Agency for International Development sectors which were adversely affected in the last (USAID) has reopened its mission in Yemen. The twelve months. agency will focus its activities on basic health care, primary education, and income and food While the CPI inflation rate declined markedly in security in selected poor rural areas of the the second half of 2002 and ending the year at 4.2%, country. it rose sharply to double digits in the first quarter of · A Macro-Economic Committee was formed to 2003 (see Flash Indictors). The inflation rate started oversee the preparation of the budget for the to decline again to single digit during April-May next fiscal year 2004. It is chaired by the Prime 2003. Minister. After the approval of the budgetary supplement in · A Chinese Petrochemical Corporation has signed the last quarter of last year, the fiscal deficit in 2002 an agreement with the Ministry of Oil for oil was estimated at 1.3% of GDP following two years exploration in an area of 2000 square kilometers of fiscal surplus. The total budget, however, was in the east of Yemen. The company is expected to balanced in the first quarter of 2003 and the outlook execute the project in two phases of three years for the whole year largely depends on oil prices. each at the cost of US$ 10 million. for. YEMEN UPDATE . .. 2 SUMMER 2003 Flash Indicators (i) GDP: The Central Statistical Organization (CSO) is currently updating the national accounts for the period 1998-2002. The next issue of the Update will highlight the most recent estimates. (ii) Government Finance: TABLE 2: FISCAL DEVELOPMENTS IN THE FIRST QUARTER OF 2003 (IN BILLION YR) Central Budget First Quarter (2003)Local Budget First Quarter (2003) The Ministry of Finance (MoF) Allocation Actual Change % Allocation Actual Change % has recently released quarterly Current revenues 134 149 12 4 3 -36 data on actual revenues and of which: Income Tax 14 15 11 0.3 0.3 11 expenditures for central Zakat 0.9 1.0 government and local authorities Oil revenue 99 115 16 0 0 -8 Current Expenditures 90 95 6 26 18 -32 for the first quarter of 2003 Salaries & wages 28 25 -11 22 15 -32 (Table 2). Actual current Goods & services 16 15 -9 1 0 -59 revenues increased over budget Transfers & subsidies 29 44 51 3 2 -23 projections by 12% for the Capital Expenditures 35 36 2 5 1 -74 Source: MOF central government and fell short of budget projection for local government by 36%. Oil revenues in the first quarter reached YR 115 billion (compared with budget projections of YR 99 billion). Income tax collections for both central and local government increased over budget projections by 11%. While the transfer of subsidies at central level increased by 44%, it decreased by 23% at local levels reflecting perhaps poor reporting. Actual spending at the central level also exceeded budgetary projection but the reverse was true at the local levels. Overall the total budget was balanced by the end of the first quarter of 2003. (iii) External Sector TABLE 3: BALANCE OF PAYMENT 2002 The Central Bank of Yemen (CBY) has (In US$ million) As % of GDP Change recently released preliminary figures of the 2001 2002 2001 2002 (%) Current Account 671 410 7.2 4.1 -44 balance of payment (BOP) for 2002.