Economists say Yemen's high rate of inflation is threatening the country's economy and might increase the number of poor and unemployed.
The annual inflation rate in Yemen in December 2011 was 23%, compared with 13% in December 2010. The inflation rate also rose to 24% in January 2012, according to an April report by Yemen's Development Research Centre of Economic and Social Studies.
Inflation caused the number of poor to rise and exacerbated unemployment and the housing crisis, the report said. It also contributed to higher transportation fees, lower purchasing power and decreased investment, likewise affecting the balance of payments and the balance of trade.
Marzouk Abdel-Wadood, the centre's director, discussed the effect inflation is having on the nation's economy.
"When inflation occurs, it results in reduced demand for goods and services, and consequently a decline in production […] with some factories suspending production altogether, as happened last year," he told Al-Shorfa. "This leads to a lower gross domestic product and lower investment, which in turn leads to an increase in the number of poor and unemployed citizens at a time when Yemen is [already] experiencing a high rate of unemployment."
According to the report, prices in the local market rose sharply in 2011. Prices for petroleum products rose nearly 400%, and the prices for some food commodities increased by more than 80%.
The report also said that last year's annual inflation rate was 21% for food, 15% for clothing and footwear, 13% for housing, 20% for furniture, 19% for health care, 53% for transport, 3% for telecommunications, 12% for education, 6% for restaurants and 10% for culture and entertainment.
Abdel-Wadood said the government's decision to print more banknotes to cover the general budget deficit lowered the riyal's purchasing power against hard currencies.
"The increase in the prices of production inputs, the price manipulation of goods and services by traders and importers, the increase in the price of petroleum products and an absence or lack of official oversight are the other reasons the inflation rate rose," he said.
Dr Taha al-Faseel, a professor of economics at Sanaa University and advisor to the Ministry of Industry and Trade, said, "The high inflation rate was brought on by internal and external factors in addition to abnormal factors that affected the economy last year, foremost among them the political factor."
He said high prices for imported food and petroleum products are two of the most important external factors, emphasizing that Yemen is a net importer of food.
"Internal factors include higher domestic oil derivative prices, which leads to higher prices for manufactured goods, in addition to instability in the exchange rate of currencies against the national currency -- which brings buying and selling to a complete standstill -- and lack of security and power outages," al-Faseel said.
Dr. Mutahar al-Abbasi, the deputy minister of planning and international co-operation, told Al-Shorfa the government has adopted measures to prevent inflation from continuing to rise.
"There are indications the rate of inflation will decline this year," he said.
"The government moved to stabilise the exchange rate and enhanced its oversight of the market and prices. It is also making efforts to control the general budget deficit by non-inflationary means," al-Abbassi said.
The increase in the price of diesel by 1,000 riyals ($4.50) per 20 litres is met with a corresponding decrease in the price of gasoline by 1,000 riyals per 20 litres, as recently approved by the government, he said.