World Bank suspends operations as economy's woes mount

The World Bank was forced to suspend its operations in Yemen at the end of July, adding to the country's woes. Economy and Trade Minister Hisham Sharaf said that the damage to the economy had reached nearly $8 billion in the first seven months of 2011 – a result of low oil output, the halting of normal tax collection and of operations that generate income for the state. He estimated that GDP had fallen by 40 per cent over the past year to $33 billion. Tourism revenue had dropped from just over $1 billion to under $50 million.

There is a knock-on effect in the private sector, caused by fuel shortages. Farming, dependent on diesel to pump water, is suffering badly, as is fishing. Another source suggests that Yemen is experiencing 'negative' growth of 14.5 per cent. The economic situation may be going from bad to worse as a result of the political crisis but there are the odd glimmers of hope. Co-operation between the contending political forces allowed the resumption of oil exports from Marib. There was an attack at the end of August on the pipeline by a tribe in Marib and though it was quickly repaired it was a reminder of how vulnerable the pipeline remains. Repairs to the electricity grid have restored partial supplies to some areas of Sana'a.

The export gas lines have so far been unaffected and shipments to South Korea and China by Yemen LNG are continuing despite the evacuation of some foreign staff. Yemen LNG wants to renegotiate the price at which it sells gas to Korea. The company is owned by Total (39.6 per cent), Hunt Oil (17.2 per cent), Yemen Gas Company (16.7 per cent) and three South Korean companies – SK Gas (9.55 per cent), KoGas (6 per cent) and Hyundai (5.88 per cent). The balance is owned by Yemenis.

DNO has said that its oil output fell by 11 per cent in August from its two producing blocks and a third operate by Dove Energy. On a different tack, workers at Nexen's operations at Masila are threatening to go on strike again over pay. A sight of the daunting task facing Yemen was given in a report in the number of jobs the economy needs to create. It needs to create 200,000 jobs a year to prevent the unemployment rate growing. But when unemployment is probably around 30 per cent and youth unemployment closer to 34 per cent the sheer scale of the task becomes apparent.

For more news and expert analysis about Yemen, please see Yemen Focus.

© 2011 Menas Associates