Yemen’s economy, already under significant strain prior to the crisis, has been severely disrupted by recent events. Reduced availability of fuel, particularly diesel, has aggravated electricity and water shortages. Read More »
After almost a year of crisis, in the wake of the Arab Spring, Yemen has embarked on a political transition based on an agreement brokered by the Gulf Cooperation Council (GCC). The Government of National Reconciliation was formed and confirmed by the Parliament in December 2011. Presidential elections were held in February 2012 and President Abd Rabbuh Mansur Al-Hadi was sworn in soon afterward. During the transition period the government is expected to launch a National Dialogue, draft a new constitution, and reform the army and security establishments. The transition will conclude in February 2014 with legislative and presidential elections to be held under the new constitution followed by the inauguration of a new president and the formation of a new parliament.
Implementation of the GCC agreement is largely on track though gains achieved so far are fragile and important challenges lie ahead.
On the political front. The National Dialogue process launched on March 18, 2013, offers an opportunity to bring together rival factions and enhance the state’s authority, but it could run the risk of a stalemate if violence or debilitating political conflict persists or if major stakeholders do not take part in the process. The 565-member National Dialogue aims at drafting a new constitution and an electoral law that would pave the way for parliamentary and presidential elections scheduled for February 2014. It is not clear yet if all factions in the Southern Movement (Hirak) will join the dialogue although an agreement has been reached to have equal representation from the south and the north as well as 30% representation of women and 20% youth. Success of the political transition is contingent on continued support from the international community, successful restructuring of the military and security establishments, and delivering tangible, visible and quick results on the economic front, especially in terms of enhanced access to basic services and job and income opportunities.
On the security front. Security in Yemen remains calm but fragile. The lead up to the National Dialogue introduced a new level of unpredictability to the security environment as many delegations are unwilling to name delegates due to the possible security risks. There is a growing concern of possible Al Qaeda attacks. The past year of political transition has witnessed slow-paced progress in re-structuring of the army and the security and dismantling of ex-regime remnants in senior government positions. Widespread arms possessions, lawless regions, armed tribal groups, sustained sabotage to energy supplies, an active Al Qaeda network, political assassinations, and kidnappings continue to pose threats to the political transition and the security of the Yemeni civilians. Tensions between Al-Hirak and Al-Islah are expected to continue in the south.
On the economic front.Yemen’s economic situation has been very difficult in 2012. There have been continued attacks on oil pipelines and electricity transmission lines leading to interruptions of oil production and electricity delivery. Nonetheless, there are signs of economic activity revival after a 10 percent decline in 2011. Inflation has come down to single digits. The exchange rate has appreciated then stabilized at pre-crisis levels and foreign exchange reserves (including the recently received US$1 billion deposits from Saudi Arabia) have increased to over US$5.0 billion. These developments have allowed the authorities to reduce the policy interest rate from 20 percent to 18 percent. The fiscal deficit is expected at around 5.5 percent of GDP as a result of the Saudi oil grant and cuts in capital expenditures and transfers. Non-hydrocarbon revenues have also exceeded the budget estimates due to strengthened collection efforts. All indicative targets under the government’s reform program that is supported by the International Monetary Fund’s (IMF) Rapid Credit Facility have been met. IMF is considering a medium term reform program.
On the diplomatic front.The U.N. Security Council envoys completed a visit to Yemen amid tight security on January 27, 2012, and issued a statement expressing the international community’s support to Yemen, and highlighting the following: (i) an inclusive and transparent national dialogue; (ii) the establishment of an Executive Bureau for the Acceleration of Aid Absorption (which is currently being supported by the World Bank); (iii) possible sanctions under Article 41 of the UN charter to any potential spoilers to the political transition (naming former president Saleh and former vice president AlBiedh); (iv) Yemen’s territorial integrity and unity (with a clear signal to Hirak that a separation by the South will not be supported by the international community); and (v) concern over arms and money transfers to Yemen from outside (hinting at recent alleged Iranian arms shipments to Yemen). Most recently, on March 7, 2013, the Friends of Yemen meeting was held London to reiterate the international community’s continued support to the country’s transition on the political and security fronts. They also underscored their commitment to deliver on the US$7.5 billion pledged for Yemen’s economic and social development through humanitarian assistance and visible high impact investment projects.
Even before the crisis, Yemen was one of the poorest countries in the Arab region with a per-capita GDP of US$1,209. The country has one of the highest population growth rates in the world, placing pressure on educational and health services, drinking water, and employment opportunities. Yemen is not expected to meet any of the Millennium Development Goals (MDGs). Poverty, which was already increasing prior to the crisis, is estimated to have risen further from 42 percent of the population in 2009 to 54.5 percent in 2012. Poverty is particularly high in rural areas, which are home to about 73 percent of the population and 84 percent of the poor. An estimated 806,586 people are now considered most vulnerable due to current and previous conflicts in Yemen, including children who have been directly involved in or affected by the infighting and violence, as well as 213,000 vulnerable returnees and war-affected persons in the north, 203,900 refugees and asylum seekers, and approximately 150,000 displaced people in the south. Women, who are already severely disadvantaged in Yemen, have suffered disproportionately as a result of the crisis. Preliminary figures from 2011 indicate decreased access to basic and social services and economic opportunities, as well as high levels of gender-based violence as a result of the unrest. These effects have compounded the severe gender imbalances that already existed.
Updated: April 2013
The World Bank Group has taken solid steps to improve and align its program with the emerging priorities on the ground:
Interim Strategy Note (ISN): TheWorld Bank Group Board of Executive Directors endorsed the new ISN for Yemen on November 13, 2012. The strategy is expected to accompany Yemen during the transition period and focuses on (i) protecting the poor by creating short-term jobs, restoring basic services, improving access to social safety nets, and revitalizing livelihoods; (ii) promoting growth and improving economic management; and (iii) enhancing governance and local service delivery by supporting transparency, accountability, and improved citizen engagement.
New International Development Association (IDA) Operations: Three new IDA, the World Bank’s fund for the poorest, projects have been approved on February 14, 2013: Emergency Crisis Recovery Project (US$100 million); Second Basic Education Development Project (US$66 million); and Road Asset Management Project (US$40 million). These projects, totaling US$206 million, constitutes over 50 percent of the pledged US$400 million by the WBG at the Yemen Donors Conference, and complements the Bank’s ongoing active portfolio with about US$700 million in net commitments.
Deauville Partnership Projects: WB teams helpedYemen access additional funding under the Deauville Partnership Transition Fund – an Enterprise Revitalization & Employment project for US$4.4 million and a Civil Society Organization Partnership project for US$1.72 million have already been approved, and others focusing on ICT and governance are under preparation.
Mutual Accountability Framework MDTF: At the request of the Government and with financial support from the United Kingdom and Denmark, a Multi Donor Trust Fund, for US$5.8 million, has been established to provide technical support to the Executive Bureau to improve absorption capacity and fast track the implementation of donor pledges.
New World Bank office and Staff Presence on the Ground: The WBG has relocated to its new and permanent location and expects to increase its presence on the ground with three additional international sector staff to support the implementation of the program.
The World Bank is closely collaborating with a number of Yemen’s development partners including development agencies from France, Germany, Italy, Netherlands, United Kingdom, United States, European Union, and United Nations agencies. The World Bank Group is also working closely with the International Monetary Fund on the macroeconomic dialogue. A close dialogue has also been established with the Cooperation Council for the Arab States of the Gulf Secretariat and bilateral agencies from the sub-region, including the Saudi Fund for Development.
Updated: April 2013
The World Bank has had a long history in Yemen, managing a broad range of projects in a variety of sectors. Some selected results include:
Basic Education Development Project: The project funded the construction of 1,996 new classrooms and rehabilitation of 1,765 existing classrooms in 10 governorates, contributing to an 11.3 percent increase in enrollment in those governorates between 2005 and 2010. The project supported about 5,000 Parents’ Councils, the recruiting and training of about 500 female teachers for work in rural areas, and provision of conditional cash transfers to benefit about 35,000 girls. Criteria for cash transfer include family income and girls’ school attendance and performance. Overall, girls’ enrollment increased by 17.5 percent and the Gender Parity Index improved from 0.7 to 0.77 in the 10 governorates targeted by the project during 2005–2010.
Social Fund for Development: The World Bank has provided grant funding and lending assistance towards job creation and income generation: 7.2 million employment days have been created, and the direct beneficiaries have reached 2.5 million people (of which 1.5 million are female) while indirect beneficiaries are 1.5 million (of which 0.8 million are female). Under the Community and Local Development (CLD) program, 2,566 classrooms were built or rehabilitated benefiting 77,401 boys and 55,479 girls, and 30,263 households have benefited from improved water resources. The program also built/improved 303 rural roads.
Public Works Project: Through this effort, over 3,900 sub-projects in the education, health, roads, agriculture, vocational training, social security, water and sanitation sectors have been delivered to over 14.7 million poor people. In addition, more than 74 months of job opportunities have been created including work for 1900 local contractors and 1250 local consultants.
Rural Access Project: As a result of the World Bank’s involvement in this sector, over 400,000 people have gained reliable year-round access to centers of economic activity and public services.