IMF Staff Concludes Visit on Yemen

IMF News, December 13, 2018

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An IMF team led by Albert Jaeger visited Amman from December 5-12, 2018 to discuss recent developments and economic measures to mitigate the humanitarian crisis in 2019.
“Almost four years of armed conflict have severely weakened Yemen’s economy.”
Hydrocarbon exports are “largely suspended,” and a “shortage of foreign exchange continued to compress the availability of basic imports—foremost food, fuel, and medicines.”
The population’s purchasing power has been “crippled,” driven by the conflict’s adverse impact on economic activity and high inflation.
Stepped up humanitarian aid has “so far forestalled outright famine conditions,” but “aid agencies are warning that the humanitarian crisis remains at a tipping point.”

Agreement that better economic policies supported by increased donor grants could “appreciably contribute to mitigating the humanitarian crisis in the short run.”
Increased donor grants would:
- “help relax the shortage of foreign exchange that compresses basic imports.”
- When channeled through the Central Bank of Yemen (CBY), provide foreign exchange resources for essential food imports.
- Provide “a sterilization tool to help stabilize the exchange rate and reduce inflation.”
The package of economic measures discussed is characterized as a “stopgap solution mitigating the humanitarian crisis in the short run.”
Restoring sustainability “beyond 2019 will require additional economic stabilization efforts.”

The Yemeni Government needs to:
- “step up efforts to control and rationalize its spending, especially on the public wage bill.”
- “improve revenue collections.”
“Strengthening the transparency of the Government’s fiscal operations, including by publishing regular reports on budgetary developments, could help catalyze more donor support.”
“Reducing the fragmentation of Yemen’s policy making institutions would help alleviate the humanitarian crisis.”
- “Reversing the fragmentation of the central bank system would facilitate pooling of fiscal revenue across governorates and paying civil service salaries and transfers in all of Yemen.”
- “Resuming full payment of civil service salaries would also help restore public services, including health and basic education services, to pre-conflict levels.”
There is a need to follow up on recommendations of a report by the recent IMF technical assistance mission on how to improve the capacity of the central bank system.

“The IMF team and the authorities agreed to review economic and policy developments again in about three months.”
The mission “will not result in a Board discussion.”
Views expressed are those of IMF staff and “do not necessarily represent the views of the IMF’s Executive Board.”

Press Release No. 18/475, December 13, 2018.