Yemen donors running out of time to stem crisis
By
<
http://blogs.reuters.com/search/journalist.php?edition=us&n=martin.dokoupil
&> Martin Dokoupil and Tom Finn
DUBAI/SANAA | Fri Jun 8, 2012 10:49am EDT
(Reuters) - Anood al-Mikhlafi, sitting in the one-room shack she calls home
in a shantytown on the outskirts of Yemen's capital Sanaa, rues the
political chaos that has engulfed her impoverished country in the past year
and left her family nearly destitute.
"We've never lived in comfort but last year pushed us to the limit and we
had to sell our animals and my wedding jewelry. We have nothing to fall back
on," she says.
Her husband lost his job in April after the concrete-mixing company he
worked for went bankrupt. Her family pulled their children from school and
sent them, illegally, to <
http://www.reuters.com/places/saudi-arabia> Saudi
Arabia to beg and, perhaps, work.
"There is simply no work left here in Sanaa. We sent them to Saudi Arabia
because we had no choice," she said.
A year of mass protests against the government and political turmoil, which
forced Yemen's long-time leader Ali Abdullah Saleh to quit in February, has
left the Arabian Peninsula state on the verge of bankruptcy. The
unemployment rate has shot above 50 percent in a country where some 42
percent of the population of 24 million live on less than $2 a day.
Resource-rich Gulf neighbors and Western countries, who watched with
mounting alarm as political crisis gave al Qaeda the opportunity to develop
a base in <
http://www.reuters.com/places/yemen> Yemen from which to launch
attacks around the world, last month pledged over $4 billion in aid to head
off a humanitarian disaster and stabilize the state.
Yemeni experts and aid agencies such as Oxfam say that is not enough. If
more aid is not provided soon, a transition process brokered by Saudi Arabia
to try and ease the political turmoil, may fall apart, they say.
"For Yemen, $4 billion is not really enough. The budget is totally zero,"
said Mohamed al-Maytami, economics professor at Sanaa University. "Yemen
needs urgent financial support, otherwise the transition process will fail."
The transition process saw President Saleh give way to his deputy Abd-Rabbu
Mansour Hadi in February after 13 months of protests against him spiraled
into fighting between rival factions of Yemen's military and saw parts of
Yemen's south fall to an Islamist militia allied to al Qaeda in the Arabian
Peninsula (AQAP).
Yemeni government troops are now engaged in a U.S.-backed drive to recapture
territory in the south.
Government officials say the country is likely to run a $2.5 billion budget
deficit this year. Modest oil and gas exports, which were a vital source of
foreign exchange for the government, have been hit by repeated attacks by
tribesmen on pipelines since the unrest started last year.
Hydrocarbons typically account for 60-70 percent of Yemen's income and the
country is losing $15 million a day as a result of the attacks, authorities
have said.
With the central bank's hard currency reserves low, the government has
little room to maneuver.
"Within the next few months the government will be bankrupt, there will be
no money for the police or for the army fighting al Qaeda," Abdulrahman
al-Iryani, the country's former water minister, told Reuters.
WATER, FUEL SHORTAGES
The IMF, which resumed lending to Yemen in April, approving the payment of a
$93.7 million loan to help address a worsening balance of payments deficit,
predicts the Yemeni economy will shrink by 0.9 percent this year. That would
follow an estimated 10.5 percent contraction last year, its worst
performance since the unification of the north and south of the country in
1990.
The $4 billion aid pledge by international donors, agreed at a Riyadh
conference last month, included $3.25 billion from host Saudi Arabia, which
has a long, porous border with Yemen, and already provides it with oil.
Saudi Foreign Minister Prince Saud al-Faisal said at the conference that his
country's contribution would support agreed development projects, but did
not give details on their timing.
Long-term development funds, while welcome, may do little to answer an
immediate humanitarian crisis and restore security, which Maytami estimates
would require at least $10 billion over 2012-2013.
In April, the IMF forecast gross official reserves would remain at $4
billion in 2012 and the budget gap would widen to 5 percent of gross
domestic product from 4.4 percent in 2011.
Shortages of electricity, water and fuel sent prices soaring last year, and
although prices have decreased somewhat from their peaks, they are still too
high for low-income families to cope with. Maytami estimates inflation is
running at 25-30 percent.
The Yemeni rial's market rate has stabilized at around 215 to the dollar,
from about 243 at the peak of the political crisis, but its depreciation and
inflation are compounding food emergencies in a country with a per capita
annual income of just $2,300.
"People buy affordable food that will fill them up quickly," said Majid
al-Shahury, who owns a grocery shop in Sanaa. "Almost half of my customers
buy their food on credit, some take months to pay off the bill."
REMITTANCE INCOME
Yemeni officials told the Riyadh conference they needed $2.17 billion
immediately for humanitarian and other purposes, and $5.8 billion for
longer-term development and infrastructure projects.
The United Arab Emirates, which has said it will give Yemen food aid worth
$136 million, is considering a separate contribution. Donors will meet in
Riyadh again in late June to discuss the aid pledges.
Yemen's experience with pledges of assistance from neighbors is mixed: its
planning minister has estimated that some $3 billion of $4.7 billion aid
pledged by the Friends of Yemen group when it first met in 2006 has not been
delivered.
Donors and some Yemeni officials have argued the chaotic security situation,
as well as corrupt and dysfunctional state institutions, impede aid by
making it impossible to know whether it will be spent effectively, stolen or
simply wasted.
"Most of it was not used because Yemen didn't have the capacity to absorb
the money in development projects for which the money was allocated," said
Charles Schmitz, an expert on Yemen at Towson University in Maryland in the
United States.
Iryani, the former minister, said the most effective form of aid may be to
bypass the government, and put money directly in the hands of Yemenis,
abroad.
"What Yemen needs now is quick cash. Traditional development funds now are
really not going to be effective," he said, arguing neighboring Saudi Arabia
held a possible key, albeit politically fraught, to defusing the
humanitarian crisis.
In the 1980s, more than 1.3 million Yemenis worked in wealthy Gulf
Cooperation Council (GCC) countries and could even travel to Saudi Arabia
without a visa. Since 1990, when Yemen failed to join its neighbors'
condemnation of Iraq's invasion of Kuwait, they have been largely replaced
by laborers from Asia.
Yemenis working in the GCC countries in 2010 sent home an estimated $1
billion in remittances, according to a Chatham House research paper. It said
security fears and concerns about potential involvement in local politics
were key obstacles to employing more Yemenis in Gulf countries including
Saudi Arabia, a monarchy that tolerates no political organization.
"The quickest and most direct way to help Yemenis is to grant them easier
access to employment in Saudi," Iryani said. "This type of income comes
directly back to poor families in Yemen and not to the government and its
agents."
(Writing by Martin Dokoupil; Editing by Susan Fenton)
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Received on Fri Jun 08 2012 - 12:42:54 EDT
