Economy of Yemen
At the time of unification, South Yemen and North Yemen had vastly different but equally struggling underdeveloped economic systems. Since unification, the economy has been forced to sustain the consequences of Yemen's support for Iraq during the 1990-91 Persian Gulf War: Saudi Arabia expelled almost 1 million Yemeni workers, and both Saudi Arabia and Kuwait significantly reduced economic aid to Yemen. The 1994 civil war further drained Yemen's economy. As a consequence, for the past 10 years Yemen has relied heavily on aid from multilateral agencies to sustain its economy. In return, it has pledged to implement significant economic reforms. In 1997 the International Monetary Fund (IMF) approved two programs to increase Yemen's credit significantly: the enhanced structural adjustment facility (now known as the poverty reduction and growth facility, or PRGF) and the extended funding facility (EFF). In the ensuing years, Yemen's government attempted to implement recommended reforms—reducing the civil service payroll, eliminating diesel and other subsidies, lowering defence spending, introducing a general sales tax, and privatizing state-run industries. However, limited progress led the IMF to suspend funding between 1999 and 2001.
A key component of the US$2.3 billion package—US$300 million in concessional financing—has been withheld pending renewal of Yemen's PRGF with the IMF, which is currently under negotiation. However, in May 2006 the World Bank adopted an assistance strategy for Yemen under which it will provide approximately US$400 million in International Development Association (IDA) credits over the period FY 2006 to FY 2009. In November 2006, at a meeting of Yemen's development partners, a total of US$4.7 billion in grants and concessional loans was pledged for the period 2007-10. At present, despite possessing significant oil and gas resources and a considerable amount of agriculturally productive land, Yemen remains one of the poorest of the world's low-income countries; more than 45 percent of the population lives in poverty. The influx of an average 1,000 Somali refugees per month into Yemen looking for work is an added drain on the economy, which already must cope with a 20 to 40 percent rate of unemployment. Yemen remains under significant pressure to implement economic reforms or face the loss of badly needed international financial support.
At unification, both the Yemen Arab Republic and the People's Democratic Republic of Yemen were struggling underdeveloped economies. In the north, disruptions of civil war (1962-1970) and frequent periods of drought had dealt severe blows to a previously prosperous agricultural sector. Coffee production, formerly the north's main export and principal form of foreign exchange, declined as the cultivation of khat increased. Low domestic industrial output and a lack of raw materials made the YAR dependent on a wide variety of imports. SectorsAgriculture and fishing
Agriculture is the mainstay of Yemen's economy, generating more than 20 percent of gross domestic product (GDP) since 1990 (20.4 percent in 2005 according to the Central Bank of Yemen) and employing more than half (54.2 percent in 2003) of the working population. The use of irrigation has made fruit and vegetables Yemen's primary cash crops. According to the World Bank and other economists, cultivation of this plant plays a dominant role in Yemen's agricultural economy, constituting 10 percent of GDP and employing an estimated 150,000 persons while consuming an estimated 30 percent of irrigation water and displacing land areas that could otherwise be used for exportable coffee, fruits, and vegetables. The fishing industry is relatively underdeveloped and consists largely of individual fishermen in small boats. This project is expected to improve fish landing and auction facilities, provide ice plants for fish preservation, and enable Yemen's Ministry of Fisheries to undertake more effective research, resource management planning, and regulatory activities. Oil and gas
Yemen is a small oil producer and does not belong to the Organization of the Petroleum Exporting Countries (OPEC). Unlike many regional oil producers, Yemen relies heavily on foreign oil companies that have production-sharing agreements with the government. Income from oil production constitutes 70 to 75 percent of government revenue and about 90 percent of exports. Marib oil contains associated natural gas. In September 1995, the Yemeni Government signed an agreement that designated Total of France to be the lead company for a project for the export of liquefied natural gas (LNG). The Yemen government expects the LNG project to add US$350 million to its budget and enable it to develop a petrochemicals industry. Industry and manufacturing
The U.S. government estimates that Yemen's industrial sector constitutes 47.2 percent of gross domestic product. Together with services, construction, and commerce, industry accounts for less than 25 percent of the labour force. The largest contributor to the manufacturing sector's output is oil refining, which generates roughly 40 percent of total revenue. Services and tourism
Economists have reported that Yemen's services sector constituted 51.7 percent of gross domestic product (GDP) in 2002 and 52.2 percent of GDP in 2003. Yemen's tourism industry is hampered by limited infrastructure as well as serious security concerns. The country's hotels and restaurants are below international standards, and air and road transportation is largely inadequate.
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