An International Monetary Fund (IMF) team led by Albert Jaeger visited
Amman from December 5-12, 2018, to discuss with officials from the
Government and Central Bank of Yemen (CBY) recent developments and economic
measures to mitigate the humanitarian crisis in 2019. At the end of the
visit, Mr. Jaeger made the following statement:
“Almost four years of armed conflict have severely weakened Yemen’s
economy. With hydrocarbon exports largely suspended, shortage of foreign
exchange continued to compress the availability of basic imports—foremost
food, fuel, and medicines.
“At the same time, the population’s purchasing power has been crippled,
especially by the conflict’s adverse impact on economic activity and high
inflation. Stepped up humanitarian aid has so far forestalled outright
famine conditions, and aid agencies are warning that the humanitarian
crisis remains at a tipping point.
“While the armed conflict remains the ultimate cause of the humanitarian
crisis, there was agreement that better economic policies supported by
increased donor grants could appreciably contribute to mitigating the
humanitarian crisis in the short run.
“Increased donor grants would help relax the shortage of foreign exchange
that compresses basic imports. Donor grants channeled through the CBY would
not only contribute foreign exchange resources for essential food imports
but also provide a sterilization tool to help stabilize the exchange rate
and reduce inflation.
“At the same time, the Government needs to step up efforts to control and
rationalize its spending, especially on the public wage bill, and improve
revenue collections.
“Strengthening the transparency of the Government’s fiscal operations,
including by publishing regular reports on budgetary developments, could
help catalyze more donor support.
“Reducing the fragmentation of Yemen’s policy making institutions would
help alleviate the humanitarian crisis.
“In particular, reversing the fragmentation of the central bank system
would facilitate pooling of fiscal revenue across governorates and paying
civil service salaries and transfers in all of Yemen.
“Resuming full payment of civil service salaries would also help restore
public services, including health and basic education services, to
pre-conflict levels.
“There is also a need to follow up on the recommendations of a report by
the recent IMF technical assistance mission on how to improve the capacity
of the central bank system.
“The package of economic measures discussed will only provide a stopgap
solution mitigating the humanitarian crisis in the short run. Restoring the
sustainability of the country’s external and fiscal positions beyond 2019
will require additional economic stabilization efforts.
“The mission team and the authorities agreed to review economic and policy
developments again in about three months.”
