Washington, DC: An International Monetary
Fund (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. At the end of the mission, Ms. Wong made the
following statement:
“Despite cautious optimism about the ongoing peace process, the economic
and humanitarian crisis in Yemen continues. Currently, 17 million people
are estimated to face acute food insecurity, while a high-level UN pledging
event raised only US$1.2 billion of the US$4.3 billion needed to address
this crisis. Despite the recent decline in global food and fuel prices,
domestic prices remain high, with food inflation averaging 45 percent in
2022.
“Risks to macroeconomic stability in the short term are highly dependent on
the evolution of the conflict and availability of financing. Attacks on oil
export facilities in October 2022 have deprived the government of most of
its revenues in foreign currency, equivalent to about half of total
revenues. This, combined with a rise in global oil prices, widened the
fiscal deficit to 2.5 percent of GDP in 2022. Without a resumption of oil
exports, the deficit is expected to widen further in 2023, despite cuts in
much needed expenditures.
“Notwithstanding these challenges, the authorities have continued to
strengthen institutions, including improving expenditure control and budget
planning, tax administration, and financial reporting. They have also taken
further steps to adopt the market exchange rates for customs revenues,
while constraining inflation by maintaining zero growth in the monetary
base. The mission encouraged the authorities to maintain this welcome
reform momentum, including to push forward reforms in the electricity
sector to reduce costs and increase revenue collection. Preserving the
weekly foreign exchange (FX) auction system, which provides FX to finance
essential imports in a transparent manner at market exchange rates, will be
key to constraining inflation and supporting exchange rate stability
through the absorption of liquidity. Moreover, progress on financial
reporting and finalizing outstanding audits will further enhance central
bank governance.
“External support is urgently needed to alleviate financing pressures,
reduce monetary financing, and safeguard hard-won exchange rate and price
stability. Further improvements in governance, together with efforts at
addressing data gaps, in particular on external and domestic debt, will be
essential to enhance transparency and eventually help catalyze additional
financing.
“Continued close donor engagement on capacity development to fill remaining
gaps, while increasing funding availability and agility of support, will be
key. To this end, the mission held extensive discussions with the
authorities and donors to better coordinate, prioritize, and sequence
activities. The IMF will continue to provide comprehensive technical
assistance to Yemen to further enhance institutional capacities.
“The mission team expresses deep appreciation to the Yemeni authorities,
technical staff, and all counterparts for their excellent cooperation and
candid discussions and looks forward to continued close engagement.”
