Facing the Hard Facts in Yemen

Context

• Yemen has made significant progress following the adoption of a Gulf Cooperation Council initiative in November, 2011 that ended a year of political turmoil: a Government of National Reconciliation has been formed; a new president, Abd Rabbuh Mansur Al-Hadi has been sworn in; and a two year transition process has been launched that will draft a new constitution and culminate in new parliamentary and presidential elections. 
  
• While reforms to address the causes of the unrest and lay the foundations for a more just and inclusive society are underway, the gains are fragile and could be undermined by any one of the multiple, immediate and long term challenges that Yemen faces. One of the poorest countries in the Arab region, the crisis exacerbated an already grave situation.
  
  

Immediate Challenges 

• Economic activity contracted by 11 percent in 2011, with unemployment estimated to have doubled from the 2010 rate of 14.6 percent. Unemployment among young people is greater still, estimated at 60 percent.
  
• Food and consumer prices have also risen steeply, and official price data show an upsurge in annual inflation to 23 percent at the end of 2011.
  
• Poverty, which was already rising at the time of the crisis, is estimated to have increased from 42 percent of the population in 2009 to 54.5 percent at the end of 2011.
  
• 10 million Yemenis, just under half the population, are food insecure.
  
• Nearly one million children under age five are acutely malnourished.
  
• The dramatic and immediate negative impact of the 2011 crisis on individuals’ health and wellbeing can be directly traced to Yemen’s chronic under-development, particularly of basic social services.
  
• Already poor social services were further impacted by the crisis, leaving large parts of a vulnerable population without access to any form of basic services such as health and education, or a functioning social safety net system.
  
• Gender equality was severe before the crisis, with women representing only 0.6 percent of the labor force.
  
• Preliminary figures from 2011 indicate an even greater decrease in access to basic social services and economic opportunities, as well as high levels of gender-based violence as a result of the unrest.
  
• The security situation remains precarious with armed insurrections in the north and south, and increased activity from Islamic militants. Increased hostilities in the south have displaced 150,000 people since May 2011.
  
  
  

Long Term Challenges

• At 3 percent per year, Yemen’s population growth rate is twice the regional average, which puts severe stress on both social services and natural resources. At the current rate, the population is expected to grow from 22 million to 50 million by 2035.
  
• The resulting ‘youth bulge,’ with nearly half the population now under the age of fifteen, will further aggravate the problem of youth unemployment.
  
•  Oil represents about one third of Gross Domestic Product, almost three quarters of Government revenues and 90 percent of exports. Yet in the absence of new discoveries, at current extraction rates crude oil reserves are expected to be exhausted in the next 10 to 12 years. Yemen may soon have no choice but to diversify its economy.
  
• Natural gas has shown promise and may become an important source of future revenue, but care will have to be taken to ensure it does not play a similar role to oil, stifling the development and diversification of the economy.
  
• Climate change combined with rapid urbanization and population growth has lowered rainfalls and put excessive demand on natural water supplies. In some major cities, such as the capital Sana’a, water is only available for a few hours each day, and the acquifers that supply them may be fully depleted in 20 years.
  
  

World Bank Engagement

• After an eight month absence due to the deterioration of security conditions, the World Bank Group resumed operations in Yemen in January, 2012.
  
• Following a request from the unity government, the World Bank, jointly with the United Nations, the European Union, and the Islamic Development Bank conducted an extensive assessment of the social and economic impact of the 2011 political crisis.
  
• The Joint Social and Economic Assessment (JSEA) concluded that for any significant reduction in poverty and malnutrition, a growth rate between seven and eight percent will be needed; almost twice the four percent average that prevailed before the crisis.
  
• This will require sustained, externally funded public investment of US$ 2 billion annually over the next four years.
  
  
• The JSEA is a key component of the transition process, informing the economic recovery plan of the Government of National Reconciliation, and serving as a basis for coordinating the efforts of the international donor community in support of the plan.  
  
  
• In September 2012, the World Bank co-hosted a door conference with Saudi Arabia and Yemen in the Saudi capital, Riyadh that managed to reach its funding goal of US$6 billion; enough to cover the transition period lasting until April, 2014.
  
  
• In consultation with the transitional government, the World Bank developed a Mutual Accountability Framework which formalized the relationship between Yemen and its donors; guaranteeing timely and adequate assistance while confirming the government’s commitment to its program of economic reforms.
  
• The World Bank pledged to add US$400 million in new resources over the coming two years to its existing program of US$700 million in commitments to ongoing projects in Yemen.
  
• To address the desperate need for employment and basic infrastructure, the World Bank launched the US$65 million Labor Intensive Public Works Project (LIPWP) in May 2012.
  
• The LIPWP will cover all of Yemen’s 21 governorates and aims to create short-term jobs and high-value public infrastructure assets for communities most in need, with the communities themselves in charge of the selection process of individual public works projects.
  
• The World Bank is currently holding a series of consultations in Sana’a with a range of government officials, representatives from civil society and academia, and the donor community to develop an Interim Strategy Note (ISN), which will guide Bank engagement with Yemen over the next 18 months.
  
• The ISN is organized around four categories: the promotion of economic stability; protection of the poor and vulnerable; revitalization of the private sector as the future source of growth; and making government more accountable to its citizens and better able to deliver vital services.
  
• An overriding concern in the design and implementation of all Bank plans will be to ensure that they are in tune with the goals of the revolution, that they foster inclusion and participation, of young people and women in particular, and promote transparency and accountability