Following the cabinet's approval of the 2012 budget last week, a number of Yemeni officials and economists called for more investment programmes and greater tax revenue to spur economic growth.
The budget, which is the largest in Yemen's history, is pending approval by parliament.
Officials said the increase in spending came in response to the security and political unrest that shook Yemen over the past year. The budget increased by 38.9% over the previous year's budget and has a projected deficit of 561,611 million riyals ($2.7 billion).
"The general budget came in response to the needs of the transitional period, which explains the somewhat high deficit," said Muhammad al-Hawri, deputy minister at the Yemeni Ministry of Planning and International Co-operation.
Al-Hawri told Al-Shorfa that this year's budget increase aims to address Yemen's poverty and unemployment problems, which were exacerbated by the political and economic crisis that swept Yemen last year.
The draft budget includes provisions to provide jobs to 60,000 unemployed Yemenis, resolve half a million Social Security cases, and institute pay raises for state employees that had been delayed since 2005, he said.
Although the budget promotes stability, "it falls short in terms of stimulating economic growth," he added.
Economists spoke to the strengths and weaknesses of the 2012 budget.
Dr Taha Al-Faseel, economics professor and advisor to Yemen's Ministry of Industry and Trade, said the budget is "ambitious", saying that it responds to the people's aspirations.
However, the budget's investment programme is "limited considering its vital importance to fighting poverty and unemployment," he said. Investment is important in creating new jobs and stimulating the private sector, which has become a key economic engine in employing the workforce, he added.
Al-Faseel said the surplus from the sale of oil and contributions generated by the Friends of Yemen conference -- scheduled to be held in Riyadh next month -- will be used to help bridge the deficit.
"The government must also consider raising tax revenue, which only represents 6.5 percent of the GDP," al-Faseel added, saying there are monumental tasks facing the government, including restoring health, education, electricity, and water services to pre-crisis levels, as well as repairing state institutions that were decimated by military clashes, such as the Agriculture Ministry, the Tourism Ministry, and the Saba news agency.
Sanaa University economics professor Hassan Farhan said the budget deficit is "realistic" and expects it to be covered by state revenue, service taxes, property-use taxes, and revenue from oil derivatives.
He underscored the importance of bridging the deficit using non-inflationary sources, saying attempting to cover the shortfall by issuing treasury bills will not do.
"The government must work to cover the shortfall from the sale of bonds or Islamic sukuk [financial certificates]," he said.