## IMF Survey: New IMF Loan Backs Yemen's Reform Efforts

_IMF News, August 3, 2010_

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**Canonical URL:** [IMF Survey: New IMF Loan Backs Yemen's Reform Efforts](https://www.imf.org/en/news/articles/2015/09/28/04/53/socar080310b)

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## Bibliographic details
- Authors: Hassan Al-Atrash IMF Middle East, Central Asia Department August
- Published: August 3, 2010

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### IMF financial support and program framework
- The IMF’s Executive Board approved a $369.8 million loan for Yemen.
- The arrangement is a three-year arrangement under the Extended Credit Facility.
- This marks the first time in nearly a decade that Yemen has requested IMF financial assistance.

### Economic context and key vulnerabilities
- Yemen population: 23 million.
- Estimated 43 percent of citizens live below the national poverty line.
- One of the highest malnutrition rates in the world.
- Yemen’s oil reserves are expected to run out within a decade in the absence of new oil discoveries.
- Depletion of groundwater is an additional resource challenge.
- Other constraints: rapidly growing population, poor infrastructure, weak institutional capacity, difficult security situation, and civil unrest.
- Oil sector developments:
  - Oil production dropped substantially beginning in 2007.
  - Collapse of international oil prices in late 2008 reduced oil revenues.
  - Oil revenues account for about 60 percent of government revenues and over 90 percent of export revenues.
  - Yemen began producing liquefied natural gas in late 2009, which only partially offset the fall in oil revenues.
- Fiscal and external pressures:
  - Record fiscal deficit of about 10 percent of GDP (2009).
  - Yemeni rial depreciation: 3 percent against the U.S. dollar in 2009 and a further 9 percent in the first half of 2010.
  - Foreign exchange reserves dropped by one-third in the same period.

### Program objectives and fiscal measures
- Overall goal: put public finances on a sustainable medium-term path and accelerate nonhydrocarbon growth while maintaining moderate inflation.
- Target: reduce the overall deficit to about 3½ percent of GDP by 2013 (from about 10 percent in 2009).
- Major measures:
  - Cut fuel subsidies, which are about 8-10 percent of GDP.
  - Increase social transfers to protect the most vulnerable segments of the population.
  - Implement tax policy and administration reforms to reduce reliance on the hydrocarbon sector.
    - Authorities intend to put in place a package of tax policy reforms that would eliminate most income tax and customs exemptions.
    - On July 1, the authorities fully implemented a General Sales Tax (GST).
  - Contain nonessential current expenditures and shift spending toward capital spending and social transfers.
    - Current vs. capital/spending mix to shift from 70 percent and 30 percent, respectively, to approximately 65 percent and 35 percent.

### Structural priorities and medium-term reforms
- Improve the business climate to support growth outside the hydrocarbon sector.
- Strengthen the social safety net to protect the poor during reform implementation.
- Maintain inflation within moderate levels while boosting public investment.

### Role of donor support
- Donor support is critical to program success.
- At a 2006 donor conference in London, development partners pledged about $4.7 billion; only a portion has been disbursed.
- The “Friends of Yemen” group has revived donor engagement, beginning with a high-level meeting in London in January 2010 that emphasized the need for rapid action and economic reforms.

*IMF Survey: New IMF Loan Backs Yemen's Reform Efforts — IMF Middle East and Central Asia Department, August 3, 2010*

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## References

- [https://www.imf.org/en/News/country-focus](https://www.imf.org/en/News/country-focus)
- [PRESS CENTER](http://presscenter.imf.org/)
- [IMF Country Focus](https://www.imf.org/en/news/country-focus)
- [Press release](https://www.imf.org/external/np/sec/pr/2010/pr10306.htm)
- [Yemen and the IMF](https://www.imf.org/external/country/YEM/index.htm)
- [Inflation dynamics in Yemen](https://www.imf.org/external/pubs/cat/longres.cfm?sk=23963.0)
- [Yemen’s economic health check](https://www.imf.org/external/pubs/cat/longres.cfm?sk=22820.0)
- [Extended Credit Facility](https://www.imf.org/external/np/exr/facts/ecf.htm)
- [https://www.imf.org/en/home](https://www.imf.org/en/home)

_Source: https://www.imf.org/en/news/articles/2015/09/28/04/53/socar080310b_