World Bank Forced Yemen To Boost Fuel Prices

by Emad Mekay

At least 13 were killed in Yemen's massive protests

(IPS) WASHINGTON -- At least 13 people were killed July 20 in the Middle Eastern nation of Yemen in massive protests against fuel price increases that came as part of an economic reform program promoted by the World Bank and the International Monetary Fund (IMF).

According to news reports from Arab television channels and online newspapers, the 13 Yemenis died during protests by thousands of demonstrators angry over the doubling of gas prices in the poverty-stricken country, which is trying to secure new loans.

Protestors clashed with the police in the capital of Sana'a and several towns as demonstrators chanted anti-government slogans, attacked government buildings and threw stones at police.

The price increases were a severe blow for Yemenis, many of whom are already well below the poverty line. Located on the southwestern tip of the Arabian Peninsula, Yemen is one of the least developed countries in the world and ranks 149 out of 177 countries on the 2004 UN Development Program Human Development Index.

The land once known as the home of the Queen of Sheba now has a per capita Gross Domestic Product of $510 a year, and 42 percent of its people live in poverty. One in five of Yemen's 21.5 million people is malnourished.

Yemeni analysts and anti-poverty campaigners pointed a finger at the policies dictated by the World Bank and the IMF, which they say benefit only Western corporations and local elites.

"The World Bank has been heavily active in Yemen as one of the poorer countries in the Middle East, and the raising of fuel prices was a very easy way for the government to generate money, supposedly," said Sameer Dossani of the 50 Years Is Enough Network, a Washington-based group that has been critical of the policies of the World Bank and the IMF.

"What's happened is that the raising of oil prices has hurt the poor far more disproportionately than the more wealthy segments of society and as a result you have this kind of violence -- very unfortunate and very unnecessary violence," Dossani said.

Under a World Bank program, the Yemeni government agreed to cut spending and reduce subsidies. The Bank and the IMF had sought a reduction in the non-oil fiscal deficit from 25 percent of GDP in 2000 to 20 percent this year by curbing expenditures and raising non-oil revenues through introduction of a general sales tax (GST), anti-smuggling measures and income tax reforms.

In March, the IMF issued a brief report in which it said that IMF "Directors particularly welcomed the planned significant reduction in the petroleum product subsidy and the improvement in tax revenue expected from the introduction of the GST by mid-year."

A month earlier, former World Bank president James Wolfensohn had visited Yemen and met with Pres. Ali Abdullah Saleh. He conditioned World Bank loans on more policy reforms, especially on the issue of "energy pricing."

"Additional financial support from the World Bank would depend on the portfolio performance and the implementation of much needed policy reforms in areas such as governance, civil service and energy pricing," said a World Bank press release on Feb. 17.

Official Development Assistance (ODA) to Yemen amounts to about $200 million annually, representing two percent of GDP, which gives the international financial institutions enormous clout with the government.

In 2002, Yemeni officials produced the country's first Poverty Reduction Strategy Paper (PRSP), which sets out the government's plans if it wants to get more funding. Sana'a is now on its way to merge the next PRSP with the Five-Year Development Plan, which included measures to raise fuel prices.

Yemen has one of the largest World Bank portfolios in the Middle East and North Africa. A new Country Assistance Strategy (CAS) is due to be renewed this year. CAS details the World Bank's commitment to a certain country and details the conditions attached to loans.

The Yemen News Agency (SABA) blamed the World Bank for the price hikes.

"Under the reforms program, the Parliament approved in December a package of administrative and economic reforms whereby the rest of government subsidy for oil products will be lifted," SABA said in its English translation of the Arabic news story.

Munir al-Mawari, a Yemeni journalist based in Washington, said that these "reforms" were grossly deficient since they did not address corruption or political change in the country.

"The burden of price reforms as such is shouldered by the poor citizen in Yemen," al-Mawari said. "Instead, they should have called for a reduction of the presidential expenses, or ministerial expenses or the military. This would have produced better results and can fight corruption too."

Dossani of 50 Years is Enough said that the riots exploded in part because of the government's acceptance of the dictates of the World Bank, and that it should instead take cues from its own people.

But a former Yemeni diplomat in Washington said the government was resorting to the Bank because assistance from Kuwait, Saudi Arabia and Iraq has dried up for political reasons.

"The only resource left for the Yemeni government is the IMF and the World Bank funding because the government is not able to generate foreign investment," said Gamal Numan. "And now the government is running very short and the only source they have is the IMF and the World Bank, and of course they put such stiff conditions to implement their programs."

An IMF spokesman said that the Fund did not have a program with Yemen at the moment and that the last program expired in 2001.

World Bank officials were not immediately available for comment.