IMF Staff Concludes Visit on Yemen

IMF News, July 19, 2019

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"Conflict has crippled Yemen’s economy and pushed the country into a humanitarian crisis."
"Some 17 million people in acute need of food aid and other forms of assistance."
Sharp contraction in economic activity and hydrocarbon exports; wide suspension of basic public services.
Public institutions, including the central bank, have been fragmented, contributing to coordination difficulties on import financing and nonpayment of salaries for many civil servants in areas outside government control.

IMF team led by Koshy Mathai visited Amman during July 10-18, 2019, to meet with a Yemeni delegation including government and central bank representatives, and private-sector participants.
End-of-Mission press release date: July 19, 2019.
Press Release No. 19/290.
Views expressed are those of IMF staff and do not necessarily represent the views of the IMF’s Executive Board. This mission will not result in a Board discussion.

Following the sharp output declines of 2014-17, growth has moved back into positive territory, albeit from a much lower per capita income level.
Macroeconomic pressures have abated recently but remain considerable.
Donor financing and increased hydrocarbon receipts were key factors in quelling last year’s dramatic volatility in the exchange rate and food prices.
Basic food imports increased toward prewar levels, supported also by humanitarian aid.

The government’s resumption of payments to a large number of workers and all pensioners in areas outside its control was welcomed as a step toward restoring household purchasing power.
The IMF urges the government to pay all civil-service salaries throughout the country.
Despite the expected increase in hydrocarbon revenues, the fiscal deficit will likely remain too large to be financed via non-inflationary means.
Required policy responses and financing:
- Additional donor financing is needed.
- Enhanced revenue collection is needed.
- Further expenditure prioritization and spending restraint while protecting priority spending, including transfers to the poor and salary payments across the country.
- Additional financing to avoid resorting to central bank financing of the deficit and to support essential imports.
"The IMF is very concerned about the humanitarian and economic costs of the conflict, and is working with donors to urgently finance basic imports and support the payment of public-sector wages and social assistance."

The government prepared a national budget for 2019—the first in five years—enabled by progress in rebuilding its technical cadre and improving data collection and analysis.
Further capacity building is needed and could be supported by donors in areas including:
- Central bank operations and supervision.
- The payments system.
- Public financial management.
Increased transparency and strengthened internal controls would help build confidence to catalyze donor financial support.
It will be critical to overcome institutional fragmentation and harmonize policy implementation across the country.
Strengthened supervisory capacity over the entire financial system is needed, including further promoting compliance with anti-money laundering and combating the financing of terrorism (AML/CFT) standards.
Improvements in statistics, public financial management, and other areas would enhance absorption of donor capacity building and ensure harmonized upgrading of central bank systems across all branches.

"The mission team would like to thank the authorities for the frank policy dialogue and looks forward to continued close engagement."

IMF Press Release No. 19/290, July 19, 2019.