The Coup Effect on Economy, Poverty And Starvation in Yemen (1)
*The Studies Center and Economic Media
*Translated By: Mr. Ameen Aljaradi
Before reviewing in detail the intensity of the negative effects of the coup on all economic sectors in Yemen, we refer to some of the indicators that preceded this collapse.
In the second half of 2013 and the beginning of 2014, the indicators of relative recovery of the Yemeni economy. The figures indicate positive GDP growth rates of 2.4% and 4.8%, and the rate of inflation during the period from 2012-2014 to less From 10% as well as the increase in cash reserves to 5.5 billion dollars and stability of the value of the national currency against the dollar at 214 per dollar.
This is due to a number of reasons, including the political stability due to the consensus witnessed by Yemen according to the Gulf initiative, which resulted in presidential elections for the transfer of power and the formation of the government of national reconciliation, and international support for the transitional period, where donors provided $ 7.8 billion after a donors’ conference in 2012.
The positive developments in the Yemeni economy reflected on the development process and the investment climate. The private sector witnessed a relative improvement in its investment and commercial activity. The number of projects registered in the General Authority for Investment increased from 95 projects at 71 billion riyals during 2012 to 104 projects at a cost of 176 billion riyals.
The Impact of the Economic Down Turn on the Economic Indicators
The Yemeni economy witnessed a state of economic deterioration during two years of the coup.
The alarming figures indicate that real GDP declined to 4 trillion and 27 billion riyals during the year 2017 compared to 7 trillion and 309 billion riyals in 2014 and a decline of 51%. While the budget deficit increased to SR 883 billion in 2016 and SR 908 billion in 2015, an increase of SR 573 billion over the year 2014, when the state budget deficit reached 335 billion riyals and 4.6 percent of GDP.
A review of the following economic indicators reveals the extent of the dredging of the Yemeni economy by the Houthi and Saleh groups within two years of the coup against legitimacy. Losses of public revenues: It seems clear from the economic indicators the size of the losses suffered by the state budget in the item of revenue due to the coup; the country lost trillion and 114 billion riyals in 2015 and trillion and 372 billion riyals in 2016.
Domestic and External Debt Surges
After the Houthi group exhausted most of the important resources of the state and hindered some of them, resorted to alternative options, which consisted of overdrafts and borrowing from banks and insurance funds, thus raising the interest of local debt to frightening numbers that are difficult to overcome in the future.
The total internal debt by the end of 2016 was about 4 trillion and eight hundred billion riyals compared to 3 trillion and 176 billion riyals at the end of 2014, of which 804 billion riyals were government bonds for pension and insurance funds. Local interest payments exceeded 700 billion riyals by the end of 2016; The internal debt increased by $ 1 trillion and 624 billion riyals. The internal debt increased from 14.8 billion dollars in 2014 to 19 billion dollars in 2015.
Exhaustion of Foreign Exchange Reserves
Before the Houthi group controlled the power in Yemen, the foreign exchange reserves in the Central Bank of Yemen was 5.5 billion dollars, and was depleted 3 billion dollars in 2015 only, and continued the process in 2016 to reach the remaining amount to 700 million dollars In September 2016, prompting the legitimate government to approve the transfer of the Central Bank to Aden in September 2016.
Depletion of Subsidies Allocated to Oil Derivatives
Such as the decision of the government of national reconciliation to lift partial support for oil derivatives one of the arguments used by the group to storm the Yemeni capital Sana’a and before the province of Amran, yet one of the first decisions taken by the militia is the decision to float the import of oil derivatives.
Control the black market and the looting of billions of dollars because of this process, especially that this comes after the acquisition of militias on the proportion of support that was adopted by the Yemeni governments for oil derivatives allocated to citizens and to generate electricity and is estimated to 664 billion riyals during 2015, 2016.
The subsidy was allocated to oil derivatives, to the operation of electric power, and the poorer groups in Yemen were benefiting – albeit partially – and these financial allocations now go to the pockets of the Houthis and those involved in robbing the state’s public resources and revenues.
The volume of attrition highlights more by identifying the subsidy of oil derivatives guaranteed by the government in the budget of 2014, amounting to 302 billion riyals for the amount of 6 million metric tons, and 29 billion riyals to support domestic gas; which means that the Houthi group acquired all those funds that are no longer paid , And was loaded on the Yemeni citizen.