The Yemeni parliament approved the draft 2010 budget. Opposition MPs boycotted the parliamentary session.

The budget for 2010 is just over US $ 10 billion, compared with US $ 9.815 in 2009. Budget deficit stands at US $ 2.460 billions, or 7 percent of GDP.

Estimates close to the government put the state income for 2010 at US $ 7.6 billion, while expenditure at US $ 10.60 billion.

Oil revenues make up 75-80% of the state’s income. In 2009, Yemen’s oil revenues dropped by over 60%, due to a combination of oil price drops and dwindling oil reserves.

Yemen’s central bank has also announced that the foreign currency reserves have dwindled during the last nine months of 2009 by more than US $1.408 billion to reach $7.411 billion compared to $8.819 billion in the same period in 2008.

Meanwhile, the Abu Dhabi Government pledged US$650 million to help Yemen. The grant is one of the largest ever made by the Abu Dhabi Fund for Development (ADFD). The money will be spent on development projects in Yemen covering infrastructure, energy, water, transport and education.

The World Bank also announced that the International Development Agency (IDA) is financing 21 developmental projects in Yemen with more than US $ 1 billion under the country assistance strategy for 2010-2013.

The funds already spent were estimated at $ 478 million, directed for 16 projects and including extra finance. There is still an amount of US $ 684 million to be released over the rest strategy period.

The aid included extra finance by the agency, according the strategy, which also noted that the extra finance is deemed a most effective way to gradually spend the aid portfolio.

A large part of the IDA' program was focused on facing recent and emergent priorities such avian flu, food crisis and floods.

December 24, 2009

Analysis and Forecast: Increasing Risk

The numbers coming out from Yemen’s budget are contradictory and some government figures are especially unreliable. However, two main conclusions can be drawn:

  1. The state income is dropping at a massive rate, and does not look to have the potential to increase significantly in the long-term. This is because a rise in oil prices will likely be – at least partly, off-set by a drop in oil reserves, on a medium term basis. Estimates expect oil to run out in 8 to 10 years;
  2. Yemen is spending its reserves of foreign currency at an alarming rate. This is estimated to be at over US $200 million a month. This will likely increase significantly in 2010 and will be difficult to replenish.

The state of the economy in Yemen is a reflection of the overall situation the government is facing. Whilst foreign assistance from the UAE and the World Bank are welcome, they will not be sufficient to reverse the rapid decline in the economic situation of the state. The state is in need of increased funds, without which it is only heading towards total collapse. The mixture of economic news coming out of Yemen during past few weeks confirms the difficult state the country is facing.

The figure below shows the approximate make-up of Yemen’s GDP: