IMF Survey: Yemen Gets $93 Million Emergency Loan from IMF

IMF News, April 5, 2012

Source details

The IMF’s Executive Board approved a $93.75 million interest-free emergency loan for Yemen.
The loan will be made under the Rapid Credit Facility, the IMF’s concessional window for countries that have experienced serious economic disruptions.
Approval date: April 4 (report published April 5, 2012).
The arrangement makes Yemen the first “Arab Spring” country to secure a loan from the IMF.

Cushion foreign exchange reserves and maintain macroeconomic stability.
Scale up social and capital expenditures.
Serve as a holding operation to give the new government time to formulate its strategy to address underlying challenges.

Yemen experienced a year-long political crisis that resulted in policy paralysis, shortages of basic commodities, and the collapse of economic activity.
Attacks on key oil pipelines and electricity facilities caused severe shortages and electricity outages.
The crisis compressed public investment, contributing to a sharp fall in output and worsening already high poverty and unemployment levels.
Yemen was the third Arab country, following Tunisia and Egypt, to witness a popular uprising demanding political and economic reforms.

A Gulf Cooperation Council–brokered agreement in late November 2011 led to a national unity government in December 2011 and the election of a new president in February 2012.
The new unity government will manage a transitional two-year period, implement constitutional and political reforms, and hold parliamentary and presidential elections in early 2014.
Immediate priorities: maintaining macroeconomic stability, creating jobs, and reducing poverty.
The government’s economic program emphasizes containing the budget deficit, addressing electricity outages, shortages of basic commodities, and distortions in the domestic fuel market; governance is also a key agenda item.

The program envisages a significant increase in social expenditure, budgeted to be higher than pre-crisis levels.
Capital spending is expected to be doubled relative to 2011.
Authorities plan to further increase capital spending if additional financing becomes available.
The program recognizes that setting the foundation for sustainable growth may require higher levels of capital spending.

The IMF arrangement is intended to provide time for formulating medium-term policies; medium- and long-term structural reforms are needed to adjust to declining oil production, bolster the non-oil sector, and reduce poverty.
A Friends of Yemen meeting is scheduled to take place on May 23 in Riyadh to help Yemen meet its challenges.
IMF mission chief Hassan Al-Atrash emphasized that “the role of donors is critical. A concerted effort will be needed from the donor community to expedite tangible assistance to help Yemen. Indeed, in the absence of significant and predictable financial support, it will be difficult to sustain growth and make a significant dent in fighting poverty.”

IMF Survey: Yemen Gets $93 Million Emergency Loan from IMF (IMF News, April 5, 2012).