Foreign Policy Blogs

Yemen’s Political Stand-Off is Increasing Economic Insecurity

Despite many promises from the international community that the “Friends of Yemen” would help this poorest country of the Arabic Peninsula to jump start its battered economy after having endured a catastrophic years in terms of the meltdown of its financial institutions, its industry sector, its currency and its dire humanitarian situation.

With a chronic shortage of petrol and diesel as well as electricity blackouts, Yemen is chocking under its own weight, with humanitarian experts now warning that famine could now spread far and wide throughout the country, potentially posing a threat to the nation’s somewhat stability as once again the very possibility of a “Revolution of the Hungry” is ever so real.

5 months after former President Ali Abdullah Saleh reluctantly agreed to ink the GCC brokered proposal, putting an end to its decades’ long rule over Yemen by nominating his long standing deputy, Abdu Rabbo Mansour Hadi as his “replacement”, the country is still living Saleh’ shadow with many of his family members still occupying key military posts and his allies being well positioned within the coalition government. Most importantly, President Saleh still heads the General People’s Congress, which itself controls the Parliament.

Since donor countries made clear from the start that their help was conditional to Saleh’s unequivocal departure from power and political life, Yemen is left waiting.

A meeting by the Friends of Yemen donor group has been twice rescheduled and now is to be held in Riyadh on May 23. Whether it will deliver economic relief remains to be seen.

The constant political bickering and the explicit threats made by President Saleh last week to recall his loyalists from the coalition government as he refused to allow his opponents to criticize his past decisions or to accuse him of any crimes against the Yemeni people, added to the overall concerns of the international community, signaling that Yemen was still tittering on the brink of civil war and chaos.

A political analyst, Ahmed al-Sofi from the University of Qatar told FPA that “although Hadi was elected President and meant to lead Yemen towards a new political era, Saleh is still lingering, hoping to jump back on the wagon and return to his former glory. It is quite clear that he still believes that he can somewhat rule from the shadow, waiting for things to turn to his advantage. He is in control of the military, hence much of the country fire power and he’s hoping that his strike abilities will deter potential contenders.

Problem is other factions are as well-armed, with hordes of loyalists waiting for the order to strike. With al-Ahmar and Saleh in the picture Yemen could yet witness a bloody fight for power. I don’t believe things are over yet. Tensions are running high indeed and both factions are constantly egging each other on, daring the other to draw the 1st bullet…. Not surprisingly, foreign investors do not feel confident that their dollars will be used wisely or even that their investment will prove fruitful.”

 “The recent deterioration of political co-operation in Yemen is concerning and we call upon all groups to engage constructively in transition,” said Britain’s Foreign Office in a statement on Friday announcing the date of the next meeting of the Friends of Yemen.

But critics say Yemen cannot afford to wait for political bickering to end and security to be restored, which donors insist on as condition for aid. The country faces economic disaster, as al-Qaeda militants exploit political, economic and security turmoil to gain ground, and their sympathizers suffer under unrestricted US drone attacks targeting al-Qaeda members.

The US and Saudi Arabia fear that the increased lawlessness will help al-Qaeda gain control over the strategic Bab al-Mandab strait, thereby choking global oil supplies.

“Yemen is drowning,” says a financial expert close to the government. “What we need right now is support for the budget or we will have to print money. Inflation will shoot to the roof and the riyal is going to collapse and every citizen will feel the brunt of it.”

Economic Meltdown

With a new budget already registering a $2.4 Billion deficit, Yemen is literally on its last leg, crippled by its inability to secure its Oil industry as armed militants continue to disrupt the industry, preventing the state to generate an income. Oil revenues account for 25% of Yemen gross domestic products, with losses in revenues estimated at $250 million per months.

Of the $6.6 billion financial package promised back in 2006, Yemen has so far received $1.1 billion in aid, essentially from the Kingdom of Saudi Arabia and the Emirates who helped palliate to the country’s need for petroleum products and also helped the cash-strapped nation meet its short term financial obligations.

Yemen faces today a 70% unemployment rate, with millions of people currently living under the poverty threshold. The majority of the budget is spent on ballooning civil service wages and fuel subsidies, leaving little for capital expenditure.

Abdelaziz Aluwaisheg, a leading Gulf Co-operation Council economist, said: “Yemen’s friends are not coming to its help. Money should flow immediately to help Yemen get on its feet. Of the promised $6bn, only $1.5bn has been delivered, mostly from Saudi Arabia. But there is a tendency from the government to blame outsiders – they should secure the pipeline; no government should allow its lifeline to be held hostage or at least some of the allies should secure it.’’

Mr Aluwaisheg, also assistant secretary-general for negotiations and strategic dialogue, noted that tax collection falls below 205 and the internal market has dried up because of security concerns, curbing the government’s ability to borrow.

Last year the economy shrank 17%, he said, and it is expected to contract more this year. “Security should be restored and tax should be collected or it will make the government insolvent.”

Sources within the government said that the U.S was pressuring the GCC into at least supporting Yemen’s annual budget deficit as the White House worries that the terror group al-Qaeda will use to its advantage further instability. However the GCC countries have claimed that before assigning their dollars they needed for the government to ensure a certain level of transparency, ensuring that funds would not as it often the case in Yemen disappear in dark corners.

Sadly Yemenis cannot afford to wait any longer for help to come in. The World food Program already warned in its last report that Yemen was fast approaching the point of no return with 5 million of people facing food insecurity, doubling 2009 recorded statistics.



Catherine Shakdam
Catherine Shakdam

Although French by birth, my studies and my professional life led me to live for many years in the United Kingdom and in the Middle East.
Armed with a Master in Finance, a Bachelor degree in Psychology and 5 languages under my belt I managed to make my way through the maze of the Trading World of Wall Street, as an equity consultant. However, my interest for Politics and the Middle East gave me the necessary push to launch me as a "writer". Since then, I have voiced my opinions via my Blog and various publications such as the Middle East Post, the Guardian UK, and now Foreign Policy Association. I currently live in London.