IMF Staff Concludes Staff Visit to Yemen

IMF News, June 7, 2023

Source details

An IMF team, led by Joyce Wong, conducted a virtual and in-person mission in Amman, Jordan with the Yemeni authorities from May 25 to June 8.
Discussions covered recent economic developments in Yemen, the outlook, and progress on key reforms.
End-of-Mission press release issued June 7, 2023.
Views expressed are those of IMF staff and do not necessarily represent the views of the IMF’s Executive Board.

Humanitarian crisis: "17 million people are estimated to face acute food insecurity."
UN pledging event outcome: raised only "US$1.2 billion of the US$4.3 billion needed" to address the crisis.
Inflation: "food inflation averaging 45 percent in 2022."
Domestic prices remain high despite a recent decline in global food and fuel prices.

Attacks on oil export facilities in "October 2022" deprived the government of most of its revenues in foreign currency, "equivalent to about half of total revenues."
Fiscal balance: the fiscal deficit widened to "2.5 percent of GDP in 2022."
Outlook: "Without a resumption of oil exports, the deficit is expected to widen further in 2023, despite cuts in much needed expenditures."

Authorities constrained inflation by maintaining "zero growth in the monetary base."
The weekly foreign exchange (FX) auction system:
- Provides FX to finance essential imports in a transparent manner at market exchange rates.
- Preserving the weekly FX auction system is identified as "key to constraining inflation and supporting exchange rate stability through the absorption of liquidity."

Ongoing institutional strengthening includes:
- Improving expenditure control and budget planning.
- Enhancing tax administration.
- Improving financial reporting.
- Adopting market exchange rates for customs revenues.
Recommended governance and data actions:
- Continue progress on financial reporting and finalizing outstanding audits to enhance central bank governance.
- Further improvements in governance and addressing data gaps, particularly on external and domestic debt, are essential to enhance transparency and help catalyze additional financing.

External support is "urgently needed to alleviate financing pressures, reduce monetary financing, and safeguard hard-won exchange rate and price stability."
The mission held extensive discussions with authorities and donors to better coordinate, prioritize, and sequence activities.
IMF support commitments:
- Continue to provide comprehensive technical assistance to Yemen to further enhance institutional capacities.
- Encourage continued close donor engagement on capacity development, while increasing funding availability and agility of support.

Maintain reform momentum, including:
- Push forward reforms in the electricity sector to reduce costs and increase revenue collection.
- Preserve the weekly FX auction system.
- Continue strengthening public financial management.
Immediate efforts should focus on:
- Continuing to strengthen public financial management.
- Preserving the FX auction system.
- Addressing data gaps on external and domestic debt.
- Mobilizing additional external financing to safeguard gains and support reforms.

The mission expressed deep appreciation to the Yemeni authorities, technical staff, and all counterparts for their cooperation and candid discussions and looks forward to continued close engagement.

Source: IMF Communications Department, June 7, 2023.