Low oil price hits government earnings
Sanaa’s earnings from oil and gas exports fell by more than 50 per cent in 2009, according to figures from the Central Bank of Yemen. This adds to the country’s acute financial problems.
The government of Yemen made $1.96bn from oil and gas in the 12 months to 31 December 2009, a fall of 54.9 per cent from the same period a year before when income totalled $4.4bn.
The government exported a total of 30.86 million barrels of oil during 2009, a 30.6 per cent fall from 44.46 million barrels in 2008. Heavily subsidised domestic consumption grew by 3.7 per cent to 25.94 million barrels, from 24.97 million barrels in 2008.
Analysts attribute the fall in revenue to the lower overall government share of production and a lower average oil price in 2009. The price for a barrel of the benchmark West Texas Intermediate crude oil was $61.66 on average in 2009, compared to $99.57 in 2008.
The fall in oil and gas revenues serves to further compound Yemen’s financial problems, which one UAE-based analyst describes as a “crisis”. Hydrocarbons accounted for 70 per cent of government income in 2008 and 25 per cent of the country’s overall gross domestic product (GDP).
According to the Washington-based International Monetary Fund (IMF), Yemeni government debt hit 45.9 per cent of the country’s $26.6bn gross domestic product (GDP) in 2009.
The central bank’s foreign currency holdings fell to $6.8bn in December, nearing five-year lows that occurred in September 2009. Meanwhile, the bank’s ability to cover foreign imports is at a record low of 7.9 months.
The cost of a war with Houthi rebels in the northern Sadaa province is believed to have hit $10m at its peak in late 2009. A ceasefire between the government and the Houthis was agreed on 10 September, giving the government some respite. Although a senior Sanaa source estimates that reconstruction in Sadaa will cost “millions if not billions of dollars” (MEED 14:2:09).
The war, which has been ongoing since 2004, has displaced a total of 250,000 Yemenis.
The government will now have to focus on the growing secessionist movement in the south of the country and the rise of the extremist group Al-Qaeda in the Arabic Peninsula (AQAP) in the east.
In a January conference in London, international diplomats pledged to help develop Yemen’s economy as part of plans to combat AQAP and similar groups. Analysts at the local thinktank Sheba Centre for Strategic Studies, believe that as much as $100bn in foreign investment will be needed to bring the quality of life in Yemen to the standard of its Gulf neighbours. The country is the poorest in the Middle East.