External Yemeni debt increases and reserves decrease

External Yemeni debt increases and reserves decrease

External Yemeni debt increased to $6.29 billion at the end of December 2009, compared to $5.894 billion at the end of December 2008. Yemen’s reserve of foreign currency, consequently, decreased by $1.157 billion over the fiscal year, ensuring around $7 billion in 2009, according to an official report issued by the Central Bank of Yemen.
 
The report mentioned loans from member states of the Paris Club that exceed $1.743 billion. The Paris Club is an informal group of financial officials from 19 of the world’s richest countries, which provides financial services such as debt restructuring, debt relief, and debt cancellation to indebted countries and their creditors.
 
The CBY report outlined Yemen’s debts to the member states of the Paris Club: $1.212 billion to Russia, $270 million to Japan and the remainder of the debt sum divided among the US, France, Italy, Spain, Denmark, the Netherlands and Germany.
 
The Central Bank reported that the debt owed to non-members of the Paris Club, other countries to whom Yemen owes money, has reached $933 million. This growing figure includes a debt of $372 million owed to Saudi Arabia, $137,400 million to the Kuwait Fund, $237 million to China. The remainder of the debt is owed to the nations of Korea, Algeria, Poland and the Iraqi Fund.
 
The Central Bank also reported on the many Yemeni debts owed to international development institutions. At present, the sum owed to these institutions stands at $3.154 billion. Yemen owes $2.179 billion to the International Development Authority, $669 million to the Arab Development Fund and $125 million to the International Fund for Agricultural Development. The remainder of the debt is split among the OPEC Fund, the Islamic Development Bank, the International Monetary Fund, Arab Oil Exporting and the European Union.
 
Professor Mohammed al-Maitami, an economist at Sana’a University, views these debts and developments as a positive sign of growth and maturation within Yemen. He said that the amount Yemen currently owes other countries equals some 50 percent of its Gross Domestic Product, whereas the money that Yemen owed foreign countries totaled $11.4 billion in 1996, which represented 200 percent of the country’s GDP. This decrease is a result of the financial policies that the Central Bank of Yemen has stringently applied, al-Maitami explained.
 
“We are in error if the government depends on the reserves of oil to protect the value of the riyal, especially when we know that Yemen’s oil production declines from day to day,” said al-Maitami.
 
“If (the government) continues to do that, the Yemeni reserves will decline from day to day, until they are finished. The government must work on expanding the reach of Yemeni exported products. This in turn will earn hard currency for our country,” al-Maitami said. “It must facilitate procedures for investment, create a strong environment to attract investors to Yemen, encourage the productivity of the private sector and remove all obstacles so the private sector can embrace its roles and responsibilities within the economy.”

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