Press Release No. 10/306
August 2, 2010
The Executive Board of the International Monetary Fund (IMF) approved on July 30, 2010 a three-year Extended Credit Facility Arrangement for the Republic of Yemen in the amount of SDR 243.5 million (about US$ 369.8 million) in support of the country’s economic reform program. An initial disbursement equivalent to SDR 34.79 million (US$ 52.8 million) is available to the Yemeni authorities immediately, with subsequent disbursements subject to semi-annual reviews. The goal of the authorities’ economic program is to achieve high and sustained growth and reduce poverty.
Following the Executive Board’s decision, Mr. Naoyuki Shinohara, Deputy Managing Director and Acting Chair, issued the following statement:
“Yemen is confronted with a range of difficult economic challenges related to its heavy dependence on declining oil revenues, widespread poverty, and water shortages. The global financial crisis has aggravated these challenges through a reduction in world oil prices, resulting in mounting macroeconomic imbalances.
“The government is embarking on a three-year economic program that aims to achieve high and sustained growth and durable poverty reduction over the medium term. The program reinforces macroeconomic stability in the face of a difficult global environment and declining oil production. It puts public finances on a strengthened medium-term footing by combining fiscal consolidation with a restructuring of expenditures more toward capital and social outlays.
“The centerpiece of the 2010 program is a reorientation of fiscal policy that reins in unsustainable deficits, while allowing for higher social spending and safeguarding capital outlays. This will be complemented by tax policy reforms to increase the revenue base, including the full implementation of the general sales tax and adoption of a package of laws that abolishes most exemptions on tax and customs duties.
“Going forward, a comprehensive structural reform agenda will be needed to meet the objectives of the program. The reforms in the first year focus largely on tax policy. Priority reforms also include a strengthening of public financial management and financial sector development.
“The role of the donors is crucial for meeting the government’s objectives. Yemen’s developmental and social needs are considerable. In the absence of significant donor financial assistance, it would be difficult for Yemen to make tangible progress toward meeting its Millennium Development Goals.”
ANNEX
Program summary
Yemen needs sustained growth to reduce poverty in the face of a rapidly growing population. The set of recent unfavorable economic and security developments, coupled with the projected decline in hydrocarbon output, pose challenges for macroeconomic stability and growth. Oil production is on a declining trend. .
The medium-term adjustment strategy will need to address the prospect of lower oil revenues while boosting public investment and social spending. The focus of the authorities’ medium-term strategy is on:
• Accelerating non-hydrocarbon economic growth while maintaining inflation within moderate levels;
• Combine fiscal consolidation with a restructuring of expenditures more toward capital and social outlay;
• Boosting non-hydrocarbon revenues through tax policy and administration measures to finance needed infrastructure and social spending;
• Maintaining adequate foreign exchange reserve cover;
• Creating a more attractive and market oriented business climate.
The macroeconomic framework targets real GDP growth of 5 percent annually— supported by robust investment. Inflation is expected to hover around 10 percent annually. . The fiscal deficit is projected to gradually decline to 3.5 percent of GDP, while the external current account deficit is projected to remain at around 5 percent of GDP (given the structure of the economy and its import dependence) and external debt ratios to decline to around 39 percent of GDP in present value terms by 2013.
| |
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| |
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|
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|
|
Est. |
|
Proj. |
|
| |
|
2006 |
2007 |
2008 |
|
2009 |
|
2010 |
2011 |
2012 |
2013 |
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
(Change in percent) |
|
|
Production and prices |
|
|
|
|
|
|
|
|
|
|
|
|
|
Real GDP at market prices |
|
3.2 |
3.3 |
3.6 |
|
3.9 |
|
8.0 |
4.1 |
4.1 |
4.4 |
|
|
Real nonhydrocarbon GDP |
|
4.7 |
5.3 |
4.8 |
|
4.1 |
|
4.4 |
4.8 |
5.0 |
5.3 |
|
|
Real hydrocarbon GDP |
|
-8.3 |
-13.1 |
-8.1 |
|
1.6 |
|
51.0 |
-1.4 |
-4.2 |
-4.6 |
|
|
Consumer price index (annual average) |
|
10.8 |
7.9 |
19.0 |
|
3.7 |
|
9.8 |
8.9 |
10.2 |
10.8 |
|
|
Core consumer price index (annual average) |
|
10.9 |
9.2 |
20.3 |
|
3.8 |
|
8.9 |
12.7 |
14.0 |
10.8 |
|
|
Core consumer price index (12-month) |
|
9.3 |
12.2 |
13.1 |
|
7.3 |
|
10.6 |
14.7 |
13.4 |
8.2 |
|
|
Hydrocarbon production (1,000 barrels/day) |
|
357 |
310 |
284 |
|
290 |
|
438 |
431 |
412 |
394 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
(In percent of GDP) |
|
|
Investment and savings |
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross domestic investment |
|
16.4 |
17.2 |
15.4 |
|
13.5 |
|
13.6 |
15.0 |
17.4 |
19.0 |
|
|
Government |
|
7.3 |
7.2 |
5.9 |
|
6.5 |
|
6.6 |
7.2 |
8.0 |
8.5 |
|
|
Other |
|
9.1 |
10.0 |
9.5 |
|
7.0 |
|
7.0 |
7.8 |
9.4 |
10.5 |
|
|
Gross national savings |
|
17.4 |
10.2 |
10.8 |
|
2.9 |
|
8.6 |
10.6 |
13.5 |
15.0 |
|
|
Government |
|
10.3 |
1.8 |
2.3 |
|
-3.7 |
|
1.1 |
2.3 |
3.3 |
5.0 |
|
|
Other |
|
7.1 |
8.5 |
8.5 |
|
6.5 |
|
7.5 |
8.3 |
10.3 |
10.0 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
Government finance |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenue and grants |
|
38.6 |
33.2 |
36.7 |
|
25.0 |
|
27.0 |
25.5 |
24.1 |
23.4 |
|
|
Total expenditure and net lending |
|
37.4 |
40.3 |
41.2 |
|
34.6 |
|
32.5 |
30.4 |
28.8 |
26.9 |
|
|
Overall balance (cash basis) |
|
-0.7 |
-5.8 |
-3.2 |
|
-10.2 |
|
-5.5 |
-5.0 |
-4.7 |
-3.5 |
|
|
Nonhydrocarbon primary fiscal balance (cash) |
|
-27.2 |
-26.1 |
-28.6 |
|
-22.3 |
|
-19.7 |
-17.5 |
-15.4 |
-12.9 |
|
|
Gross Public Sector Debt |
|
40.8 |
40.4 |
36.4 |
|
51.0 |
|
45.8 |
45.9 |
45.6 |
45.0 |
|
|
External debt |
|
28.7 |
26.9 |
21.9 |
|
24.2 |
|
21.1 |
21.0 |
21.2 |
21.3 |
|
|
Domestic debt |
|
12.1 |
13.5 |
14.5 |
|
26.8 |
|
24.7 |
24.8 |
24.4 |
23.7 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
(Twelve-month change in percent) |
|
|
Monetary data |
|
|
|
|
|
|
|
|
|
|
|
|
|
Broad money |
|
27.7 |
16.8 |
13.7 |
|
10.6 |
|
15.5 |
16.0 |
… |
… |
|
|
Reserve money |
|
17.1 |
11.3 |
8.3 |
|
11.2 |
|
14.3 |
15.0 |
… |
… |
|
|
Credit to private sector |
|
16.7 |
35.7 |
17.5 |
|
-4.8 |
|
18.0 |
20.0 |
… |
… |
|
|
Benchmark deposit interest rate (percent p.a.) |
|
13.0 |
13.0 |
13.0 |
|
10.0 |
|
… |
… |
… |
… |
|
|
Velocity (non-oil GDP/M2) |
|
1.9 |
1.9 |
2.1 |
|
2.0 |
|
2.1 |
2.1 |
… |
… |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
(In millions of U.S. dollars, unless otherwise indicated) |
|
|
External sector |
|
|
|
|
|
|
|
|
|
|
|
|
|
Exports, f.o.b. |
|
7,316 |
7,050 |
8,977 |
|
5,855 |
|
8,099 |
8,473 |
8,336 |
8,026 |
|
|
Of which: hydrocarbon (oil and gas) |
|
6,733 |
6,264 |
7,895 |
|
4,532 |
|
6,615 |
6,895 |
6,617 |
6,131 |
|
|
Of which: nonhydrocarbon |
|
583 |
785 |
1,082 |
|
1,323 |
|
1,484 |
1,578 |
1,720 |
1,896 |
|
|
Imports, f.o.b. |
|
-5,926 |
-7,490 |
-9,334 |
|
-8,056 |
|
-8,637 |
-9,058 |
-9,462 |
-9,979 |
|
|
Current account (in percent of GDP) |
|
1.1 |
-7.0 |
-4.6 |
|
-10.7 |
|
-5.0 |
-4.4 |
-3.8 |
-4.0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sources: Yemeni authorities; and IMF staff estimates and projections. |
|
|
|
|
|
|
|
|
The Republic of Yemen joined the IMF as a member in 1992. Its quota is SDR 243.50 million (about US$369.8 million).
| |
|
| |
|
|
|
|
|
Est. |
|
Proj. |
|
| |
|
2006 |
2007 |
2008 |
|
2009 |
|
2010 |
2011 |
2012 |
2013 |
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
(Change in percent) |
|
|
Production and prices |
|
|
|
|
|
|
|
|
|
|
|
|
|
Real GDP at market prices |
|
3.2 |
3.3 |
3.6 |
|
3.9 |
|
8.0 |
4.1 |
4.1 |
4.4 |
|
|
Real nonhydrocarbon GDP |
|
4.7 |
5.3 |
4.8 |
|
4.1 |
|
4.4 |
4.8 |
5.0 |
5.3 |
|
|
Real hydrocarbon GDP |
|
-8.3 |
-13.1 |
-8.1 |
|
1.6 |
|
51.0 |
-1.4 |
-4.2 |
-4.6 |
|
|
Consumer price index (annual average) |
|
10.8 |
7.9 |
19.0 |
|
3.7 |
|
9.8 |
8.9 |
10.2 |
10.8 |
|
|
Core consumer price index (annual average) |
|
10.9 |
9.2 |
20.3 |
|
3.8 |
|
8.9 |
12.7 |
14.0 |
10.8 |
|
|
Core consumer price index (12-month) |
|
9.3 |
12.2 |
13.1 |
|
7.3 |
|
10.6 |
14.7 |
13.4 |
8.2 |
|
|
Hydrocarbon production (1,000 barrels/day) |
|
357 |
310 |
284 |
|
290 |
|
438 |
431 |
412 |
394 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
(In percent of GDP) |
|
|
Investment and savings |
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross domestic investment |
|
16.4 |
17.2 |
15.4 |
|
13.5 |
|
13.6 |
15.0 |
17.4 |
19.0 |
|
|
Government |
|
7.3 |
7.2 |
5.9 |
|
6.5 |
|
6.6 |
7.2 |
8.0 |
8.5 |
|
|
Other |
|
9.1 |
10.0 |
9.5 |
|
7.0 |
|
7.0 |
7.8 |
9.4 |
10.5 |
|
|
Gross national savings |
|
17.4 |
10.2 |
10.8 |
|
2.9 |
|
8.6 |
10.6 |
13.5 |
15.0 |
|
|
Government |
|
10.3 |
1.8 |
2.3 |
|
-3.7 |
|
1.1 |
2.3 |
3.3 |
5.0 |
|
|
Other |
|
7.1 |
8.5 |
8.5 |
|
6.5 |
|
7.5 |
8.3 |
10.3 |
10.0 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
Government finance |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenue and grants |
|
38.6 |
33.2 |
36.7 |
|
25.0 |
|
27.0 |
25.5 |
24.1 |
23.4 |
|
|
Total expenditure and net lending |
|
37.4 |
40.3 |
41.2 |
|
34.6 |
|
32.5 |
30.4 |
28.8 |
26.9 |
|
|
Overall balance (cash basis) |
|
-0.7 |
-5.8 |
-3.2 |
|
-10.2 |
|
-5.5 |
-5.0 |
-4.7 |
-3.5 |
|
|
Nonhydrocarbon primary fiscal balance (cash) |
|
-27.2 |
-26.1 |
-28.6 |
|
-22.3 |
|
-19.7 |
-17.5 |
-15.4 |
-12.9 |
|
|
Gross Public Sector Debt |
|
40.8 |
40.4 |
36.4 |
|
51.0 |
|
45.8 |
45.9 |
45.6 |
45.0 |
|
|
External debt |
|
28.7 |
26.9 |
21.9 |
|
24.2 |
|
21.1 |
21.0 |
21.2 |
21.3 |
|
|
Domestic debt |
|
12.1 |
13.5 |
14.5 |
|
26.8 |
|
24.7 |
24.8 |
24.4 |
23.7 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
(Twelve-month change in percent) |
|
|
Monetary data |
|
|
|
|
|
|
|
|
|
|
|
|
|
Broad money |
|
27.7 |
16.8 |
13.7 |
|
10.6 |
|
15.5 |
16.0 |
… |
… |
|
|
Reserve money |
|
17.1 |
11.3 |
8.3 |
|
11.2 |
|
14.3 |
15.0 |
… |
… |
|
|
Credit to private sector |
|
16.7 |
35.7 |
17.5 |
|
-4.8 |
|
18.0 |
20.0 |
… |
… |
|
|
Benchmark deposit interest rate (percent p.a.) |
|
13.0 |
13.0 |
13.0 |
|
10.0 |
|
… |
… |
… |
… |
|
|
Velocity (non-oil GDP/M2) |
|
1.9 |
1.9 |
2.1 |
|
2.0 |
|
2.1 |
2.1 |
… |
… |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
(In millions of U.S. dollars, unless otherwise indicated) |
|
|
External sector |
|
|
|
|
|
|
|
|
|
|
|
|
|
Exports, f.o.b. |
|
7,316 |
7,050 |
8,977 |
|
5,855 |
|
8,099 |
8,473 |
8,336 |
8,026 |
|
|
Of which: hydrocarbon (oil and gas) |
|
6,733 |
6,264 |
7,895 |
|
4,532 |
|
6,615 |
6,895 |
6,617 |
6,131 |
|
|
Of which: nonhydrocarbon |
|
583 |
785 |
1,082 |
|
1,323 |
|
1,484 |
1,578 |
1,720 |
1,896 |
|
|
Imports, f.o.b. |
|
-5,926 |
-7,490 |
-9,334 |
|
-8,056 |
|
-8,637 |
-9,058 |
-9,462 |
-9,979 |
|
|
Current account (in percent of GDP) |
|
1.1 |
-7.0 |
-4.6 |
|
-10.7 |
|
-5.0 |
-4.4 |
-3.8 |
-4.0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sources: Yemeni authorities; and IMF staff estimates and projections. |
|
|
|
|
|
|
|
|
|
