Parliament approves measures to reduce effects of financial crisis

Parliament has approved several recommendations which will allow the government to deal with possible repercussions from the global financial crisis on the national economy, according to a report from the parliamentary Finance Committee.

These recommendations were passed during a session of Parliament held last Monday. This meeting was chaired by Speaker of the House Yahya al-Ra’ei, and attended by Ahmed al-Fadhli, Deputy-Minister of Finance and Ahmed al-Smawi, Governor of Central Bank of Yemen.

The recommendations stressed the need to apply measures to rationalize all expenditures from the 2009 budget; however this rationalization must not affect the financial allocations of investment expenditure program.

Parliament obligated the government to provide these measures and procedures during a discussion of the public budget for the 2009 fiscal year.

Parliament directed the government, which was represented by the Ministry of Finance, Tax Authority and Customs Authority, to collect all taxes and customs fees and speed up potential amendments to the Income Tax Law. It suggested the cancellation of customs exemptions, and the need to strengthen the capacity of promising sectors such as agriculture, fisheries and tourism, which can raise revenues and compensating for fluctuations in incomes from other resources.

It also recommended developing the necessary infrastructure to attract domestic and foreign investment, and removing obstacles to creating a favorable investment climate which could help solve the related problems of unemployment and poverty. Improving the investment environment would help Yemen overcome expected difficulties related to a possible economic slowdown, which is considered a strong possibility in light of the global financial and economic crisis.

The recommendations proposed the government take all necessary measures to stop the smuggling of oil derivatives, and to expand investment in the oil and gas sector because of its great importance to the national economy.

The meeting also encouraged international organizations and donor countries to follow up on their promises from the London Donor Conference to offer financial grants and remove obstacles preventing Yemen from obtaining these loans.

Parliament confirmed the importance of observing standards on credit and loans from the banking sector in accordance with the precautionary measures issued by the Central Bank of Yemen.

Parliament also directed the government to prevent all institutions, public bodies and private funds from investing in treasury bills, but rather to invest their savings in the national economy and development projects.

The recommendations suggested the government review the existing system of fiscal and economic policies to ensure Yemen avoids repercussions from the global financial crisis.

Parliament’s Financial Affairs Committee revealed the most negative effect of the global financial crisis on national economy is the retreat of oil prices. This decrease will negatively affect budget resources as well as the balance of payments and trade balance. This decline will ensure the government runs a deficit rather than a surplus.

The challenge facing Yemen is the need to strengthen the capacity of our national economy, exports from the non-oil sector and to create and develop other resources to supplement the public budget. The public budget depends on oil revenues for 75 percent of government spending. So, the exploitation of promising sectors to diversify the structure of the national economy is essential to reduce the national dependence on oil.

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