Consumers shop at Souq al-Melh in Sanaa. [Louafi Larbi/Reuters]
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.
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READER COMMENTS
رشاد
2012-6-25
Almost everything that is said and written about Yemen these days relating to the challenges facing the country after the crisis that befell it during 2011 and there is no doubt that the challenges that Yemen had suffered from were serious; it is clear that they worsened after the crisis, especially in the economic sector. It is sufficient to refer to a very important report published by the World Food Organization based on field surveys that show the dangerous deterioration experienced by the food security rates in Yemen. However, the report highlighted the magnitude of the human suffering that more than ten million Yemeni are living in who today do not receive enough food. Moreover, more than half of this number suffers from food insecurity. These are serious and comprehensive indicators that point to the worsening of poverty and the decline of incomes, as well as the rising unemployment rates that are added to a long list of current developmental and economic indicators that show the magnitude of the challenges faced by the Yemeni citizen.
مامؤن قاسم
2012-6-23
The economic crisis has had a negative impact on citizens because of the lack of jobs, appropriate services and the dangers that followed in Yemen. In fact, the crisis has spread rapidly to all sectors including the economic one. It has not been confined to one particular sector. Therefore, the crisis has affected the influx of foreign investments to the country. The latter has also been affected indirectly by the terrorist acts that urged a lot of businessmen to halt their projects and this has consequently led to the decline of the State Budget revenues which will affect all the different internal and external economic activities. Besides, the Yemeni investments abroad have been harmed indirectly. The Yemeni Government has passed a lot of measures in the different sectors in order to address the losses resulting from the crisis. These measures include the support of the institutions, companies and banks through implementing positive steps such as adopting the reduction of the interest rates as one of the tools of monetary policy and insuring deposits so that they will contribute to promoting the confidence of depositors after the collapse of the institutions which are working in the field of loans. In fact, although Yemen is one of the countries that have international economic and trade relationships in the fields of agriculture and the importation of food and industrial tools from abroad, this country has only a limited economic and financial openness. This could be explained by the fact that Yemen, unlike the other Arab countries, is not part of the international economic and financial system. This can also be attributed to the limited volume of transactions between the Yemeni Central Bank and the American banks and financial institutions.
واعد علي
2012-6-23
The impact of the economic crisis on Yemen would be as large as its openness to the global economy. In addition, the decline and the deceleration of economic growth in other countries would have an impact on the decline of Yemeni economic growth. As a matter of fact, Yemen has taken serious measures to deal with the economic and the financial crisis in order to minimize the negative impacts of the economic crisis. It has succeeded in doing that through managing the crisis rationally, avoiding individualism and through the promotion and the increase of production skills so as to meet the food shortage in collaboration with the international organizations. Yemen has also pushed commercial banks to play a more effective and varied role. In this respect, the research is trying to determine the extent of the effects of terrorism and its acts on the Yemeni economy because of the continuity of this economic crisis. Then, the research would make a set of proposals to address these effects. In fact, the effects and the signs of the crisis of terrorism have started to spread and move from one country to another in most of the world countries. Besides, its negative impacts affected both developed and underdeveloped countries and even the countries which have nothing to do with terrorist cells. As a result, this crisis has led to major losses for banks and financial institutions which have lost confidence in Yemen, mainly that of the investors and shareholders in addition to the disorders and imbalances in general in the public sector as well as the energy and the financial sector. Such a state has also led to the collapse of the financial, insurance and other institutions in Yemen. Indeed, the degree of collapse and lack of confidence differed from one sector to another. In addition, stock markets have witnessed fluctuations in prices ranging from increases and decreases and instability leading to the instability of energy-based production markets. In fact, oil prices have reached their highest record, leading to economic instability in Yemen. The latter may decelerate the growth rates and this will have a negative impact on the trade relationships, bearing in mind that this deceleration will spread from Yemen to the world.
وائل بشار
2012-6-16
The Yemeni Revolution opposed the former president and succeeded in completing its path and facing the obstacles. Yet, stability has to be established, so as to complete the aims of the Yemeni Revolution. The economic crisis is getting worse in Yemen day by day; it is increasing due to the bad and deteriorating political situation, which in turn worsens the economic situation. The reason for the deterioration of the economy in Yemen on the individual and state level is the fabricated crises, such as the lack of oil and the electric outages for long hours every day. This led to the work in big factories stopping; it even led to stopping of the small sewing workshops. This is the least that can be said in this regard; i.e. there is a lot more. The same applies to the lack of oil that led to the halt of the movement of means of transportation inside the governorates and the high cost of transportation fees between governorates in a mad and huge way. This is increasing the deterioration of the economic situation inside Yemen.
نوح
2012-6-16
The cost is paid by the Yemeni citizen, while the government is trying to improve his living conditions and financial situation. Today, the tourism sector is showing positive indications, despite the dire economic conditions. This is reflected with the high demand to visit Yemen to enjoy its beautiful weather, cultural heritage and unique monuments. This coincides with the government’s efforts to convince some European countries to cancel their warnings not to visit Yemen or to take urgent precautions. Yemen is a secure and stable country and it welcomes its guests. Yemen is an active member in the international campaign to fight terrorism. Our country is a victim of terror and sabotage actions that have targeted its security, stability and economic and social development.
محمد صبحي
2012-6-12
After the outbreak of the Yemeni revolution against the corrupt ruler, the deterioration of the economy is expected like what happened in other countries that have witnessed similar popular uprisings. The decline of the economy will remain for a short period, or until the situation would stabilize and order would be restored. When chaos prevails, it destroys everything until things calm down again, and this is what happened to the Yemeni economy. The increase in goods' prices indicates a weak or unstable security this will lead to a more chaotic situation that will result in rising prices rather than reducing them.
عبدالرحمن
2012-6-12
Terrorism's goal is destruction and like a virus, it aims to spread worldwide: once it hits a country, you cannot treat it. It is a filthy bacterium; they use it against the States to deceive people, and spread corruption and darkness in the whole world. It attacks the targeted country's ground facilities, infrastructure and properties. Their acts include arsons, bombings, destroying public and private properties, the sabotage of public transport and the bombing of embassies, tourism companies and other targets. And this undermines the country's economy as well as the tourism sector; all these terrorist acts are aimed to provoke a state of terror and panic among the people, to threaten the security and stability of the international community and to prejudice the safety of vital facilities and destabilize international relations that should prevail in international dealings.
بشار حسن
2012-6-12
Securing the homeland against the threats that menace it internally and externally and ensuring its interests and creating the appropriate conditions at the economic and the social levels in order to achieve the goals and objectives that express the general satisfaction in the community. The task of the security could be summed up in the provision of safety and tranquility for all the individuals against any attacks or abuses that would create chaos in the society. The national security requires from the State a permanent readiness to secure the material and human potential in all areas to confront any terrorist or intellectual threat against its security from any subversive elements. The feeling of citizen if the security is strong makes him safer physically and mentally, from feeling fear, anxiety and tension for the stability of his conditions in life in his homeland and the psychological security raises the morale and strengthens self-confidence that is embodied in the general behavior and self-discipline and the personal and social adaptation and achieving comprehensive security doesn't come only through the security apparatus.
ايمن فارس
2012-6-12
The government must cleanse Yemen of the subversive movements that will drain the country's resources and spread horror and desolation. The Yemeni citizen is suffering from rising prices which made him unable to get his basic needs. The government must enhance investment projects that will play an important role in boosting the economy and will provide job opportunities, solving the unemployment problem which is affecting many Arab youth due to the lack of such projects. Investment projects will positively impact the whole country by providing the needed resources, raw materials and funds, in order to allow the implementation of these projects. All state agencies should start studying projects beneficial to the country and address all the problems that hinder their implementation and ensure their success. Yemen is currently outside the boundary of the global economy, and the Yemeni government must be working on the provision of the distinctive opportunities for the Arab businessmen who want to expand their business worldwide, but at the same time want to make a lot of profit and the provision of the best offers and prices for such projects. The Yemeni government must give Arab investors the needed incentives to attract them, and create a suitable investment environment by providing them with the best offers and prices and the appropriate places to establish their projects. Investments projects will support the Yemeni industry, which will lead to a reduction in commodity prices. The Yemeni government should quickly work to implement those conventions to secure a better future for Yemenis.
ثائر نوري
2012-6-10
Yemen suffers from a real vulnerability in its economy and commercial traffic. In fact, this country is still marred by underdevelopment and excessive adherence to old fashioned customs and traditions which do not serve the community. This situation hampers the progress and development of that community. Indeed, the poverty rate in Yemen is very high. Most of the Yemeni people are living below the poverty line. They do not own businesses or have well paid jobs in the Government Departments that could enable them to meet their needs. Indeed, Yemen is suffering from high unemployment rates, which are going up every day. This is attributable to the declined economy, which is getting worse day by day because of the lack of projects and effective development plans in Yemen. Such projects would improve the economic conditions of Yemen, reduce unemployment and raise the living standards of the impoverished citizens in Yemen. Therefore, it is the duty of the Government of Yemen to look for quick solutions to relieve the Yemenis from their suffering and their poverty. Thus, it must seek to establish giant industrial, commercial and agricultural projects in the territory of Yemen in order to reduce the growing unemployment rates and improve the living situation of the Yemeni people. Indeed, such projects would revive the economy of Yemen, which is going through recess. In so doing, the Government would develop the Yemeni society, which is still suffering from manifestations of backwardness, ignorance and poverty. On the other hand, the competent authorities must direct the private businesses of Yemen to improve the miserable conditions of Yemenis. The continuation of such a condition, where services are totally absent, would complicate the problem and make things worse in the future. Of course, this will not serve the interests of Yemen and its people. Thus, the situation must change. The Government must intervene to find effective solutions to overcome those problems, which marred the lives of the Yemeni people. The Yemeni authorities should also eradicate unemployment, which is a serious scourge that may lead to the collapse of the community.
وهبي شاكر
2012-6-10
The problem of Yemeni security is traceable to the old economic crises. In fact, Yemen today is one of the world's poorest countries despite its large territories and long coastal and land borders. Still, the central Government is very vulnerable. All those factors encouraged al-Qaeda to move and settle down in Yemen. The conditions of Yemen offered a favorable environment for the Houthis’ rebellion, which was originally a result of incitement and help of foreigners, namely Iran. In fact, the maintenance of the security of any country in the world requires substantial funds that could exhaust the budget of the States. Yemen has never been able to afford such services. What matters now is that things there do not deteriorate further. There is still a reasonable chance to fight al-Qaeda and the insurgents provided that the neighboring and the other regional countries assume the importance of stability, security and tranquility in Yemen.
سالم
2012-6-10
The Yemeni economy is not strong enough. Indeed, the overspread poverty and unemployment represent solid evidence on that. Still worse, those demonstrations have suspended all life aspects in Yemen. This situation will have a significant impact on the Yemeni economy. Indeed, the trade, import and export operations are almost totally suspended. Besides, the international companies would not invest in this country as long as the conditions are not favorable. The only victims are the poor Yemeni people.
يوسف فاروق
2012-6-9
Developing a fully discussed plan is required that will make the Yemeni government play a helpful role in the reform of the imbalance of population and economic dislocation which is currently reinforcing the feeling that the situation is difficult in Yemen. Several challenges are facing the country at the same time, and we also see there is unrest in the southern regions; there are incidents of a terrorist nature committed by al-Qaeda of killings and acquisition of control of the site in general. There is also an emerging war which has been going on for many years through foreign hands that play a role successively in the Arab countries for which we have not found yet a solution despite the presence of mediation by Arab countries. Also there is above all a real and deep economic crisis going back to the ratios of Yemen's oil supply relative to the reserve quantities in the territory of the country, and its water on the other hand. There is a large population growth on the other hand, as we mentioned earlier, the areas where all different Arab nationalities are stationed, and this growth takes into account all economic progress, achieved at any level, as it has an impact on Yemen and its people and on their lives.
ابراهيم صبحي
2012-6-9
The person who sees or hears what happens in the present days in Yemen believes that they are in a terrifying situation, a part of which is true and the other part is exaggerated, and it is more certain that there is an awareness in the political leadership of the importance of addressing the situation away from any kind of problems, whether in the north or the south or middle. The economic crisis facing the country is the largest obstacle, including Arabs locally in the Arabian Peninsula. We have to look at the farthest point to the occurrence of such a crisis and the bottom line is that the brother Arab countries should generally recognize that any deterioration of the situation in Yemen is not in their interest. Yemen is part of those States and they should take into account that in unity they represent the major powers, and more so that any deterioration can only have implications for security in the Middle East as a whole. I see that is not right that the Arab countries think of their interest in the economy on one hand, and the Yemeni economy on the other hand. I do not see that Arab countries rain aid on Yemen, whether financial or security, but they should be thinking about the fact that any aid is welcome, whatever the amount.
وسام راضي
2012-6-8
We recognize that the economic problem in Yemen is not far from the political crisis by any means. If we want to diagnose the crisis that led to the economic problem, we must first know the causes and treatments and then place it right. No one knows the history of Yemen as a separate entity before 1918. As it was, before that date, a part of the surrounding area and subject to what it was subjected to; it was a state of the Ottoman Empire, which was wiped out by the Arab and Turkish traitors in collaboration with the English. Since the entry of the capitalist system into Yemen, Yemen has suffered from crisis, wars, assassinations, strikes, poverty, unemployment, and the control of the colonizer over their potential and capabilities in collaboration with people of influence and interests. The economic problem is not due to the lack of resources in Yemen or due to the increase of consumption or imports or in the poverty of the country, but in the poverty of individuals. The fundamental problem lies in the secular system, which controls Yemen and manages this system, and in the West's policy towards Yemen and the financial and administrative reform programs developed by the World Bank and International Monetary Fund.
حاكم صبحي
2012-6-8
One of the most important negative impacts of the rise in the prices of oil on the economies is inflation and the rising costs of living, significantly leading to the deterioration of the living standard for many citizens, but the impact of the rise of the costs of living actually exceeds the deterioration of the living standards of the individuals. The most negative impact in this respect is that the sharp rise of prices and inflation rates weakened the competitiveness of many countries in the region and affected their ability to attract investment, corporations, and businesses. The impacts also affected the speculation in stock markets and real estate. That is because the increase in liquidity has significantly led to an unprecedented rise in dealing in the financial and real estate assets. Hence, this led their prices to rise abnormally.
hani
2012-6-5
After that, Allah blessed the people of Yemen in order to rid the corrupt clique. Today, they must forget all the differences, get ready for a new phase of construction and work for the advancement of the country in social and economic terms in order to be able to get out of the crisis being experienced by the country at the present time. The best way to achieve this is to open the door for investments in the country and to give attractive incentives for the companies to make investments in Yemen in order to move the wheel of the Yemeni economy for the better. Investment operations will have a significant impact on creating job opportunities that will enable many Yemeni people to contribute to getting rid of the problem of unemployment, which is one of the reasons for the occurrence of large problems in the country. Investment will lead to significant economic returns to the country, thus contributing to the recovery of the economic situation of Yemen and keeping it from collapsing.
احمد جمال
2012-6-5
Yemen suffers from low economic, political, social standards and sometimes she suffers from the weakness of the economic level because of many factors such as the disparity in the amount of human resources and the size of the natural resources, and in the size and level of the means of production and technical progress and the inequality in the distribution of income and its size. It also appears in the disparity and the existence or non-existence of democratic institutions and the one ruling party or political pluralism. It seems that the lack of a strong economic structure caused the decline in the level of education and the illiteracy rate and the standard of the other services provided to the Yemeni citizen. This includes the relationship between the population and the means of getting access to the basic health and education services and meeting the minimum security situation and advancement of human welfare, and respect for human rights. It also includes the development of different cultures, diversity and pluralism and the extent of the people's participation in taking the decisions of interests to his social and cultural life, the effectiveness of women in the Arab society and the contribution of technology in the lives of the individuals. The subject of population growth represents a major problem in the developing countries, unlike in the developed countries. This is due to an increase in the proportion of births as a result of early marriages and the best among the cultures encourages this. This is reflected directly in the problem of unemployment and the problems of education and health, and therefore the development programs as the increase of the real income cannot be greater or parallel to the rate of the increase. All those problems in Yemen cannot be resolved by the Arab countries because each state has a budget for her citizens who cannot forget about their own future to consider the future of other people.
قصي عدنان
2012-5-30
The Yemeni citizens suffer from a bad economy that affects the future of Yemen; it led to the increase in the poverty rate, which reached unreasonable degrees. Poverty has become the controlling factor of most citizens in Yemen. Yemen has never been a country with a strong economy at any time. The government has to start putting strategies in place to develop all the sectors. Many of the citizens of Yemen work overseas, especially in the Arab countries, and this is why Yemen does not have a sufficient workforce to improve the state of the economy. Changing the conditions of Yemenis for the better will contribute to changing their lives and future and running their country. Yemen needs many things that will help in developing its coming future. The democratic process in Yemen has not started yet, but it needs a lot of development so that it can be implemented. The old regime is gone and another man came into power from the same old regime. We need an honest president to start the new country. It is time to put the regime of Saleh on trial for the crimes they committed. It is time to destroy everyone who contributed to destroying Yemenis.
سليمان
2012-5-30
The Yemeni people suffer from a lot of problems that affect their future everywhere. They are still suffering from the bad economic conditions in Yemen. The economic conditions are very fragile in Yemen and they need a lot of efforts to be improved in the future. The current situation of Yemenis is very bad in all aspects. There is no chance in Yemen to establish big projects to help improve the Yemeni economy instead of the deteriorated conditions that affect the Yemeni citizens in all sectors. Unfortunately, the reason for the deterioration in the economy is the failure of the security system that failed to secure the Yemeni lands from the danger of al-Qaeda. This terror movement controls many Yemeni cities. The economic level needs the necessary support from the government to provide the security environment that will lead to the development of investment sectors.
سعيد مالك
2012-5-30
The biggest problem faced by the Yemeni national is a slow economy, which caused a lot of problems. The citizen of Yemen is unable to work for lack of opportunity to work that resulted from the stoppage of the sectors of industry and agriculture due to the inability of the government to develop these projects due to a lack of cash and the poor security situation that caused the flight of many Yemeni businessmen with their projects to establish them in other countries, and the high prices.This is because because they resort to importing food from abroad, and the situation becomes bad for the simple citizen who suffers from a lot of problems and could not buy them for lack of money to do so. If the Yemeni government resorted to the development of industry and domestic production, it could save a lot of basic goods at cheaper prices for citizens instead of poverty witnessed by Yemeni citizens in all the services which they hoped to get in a better and easier manner than now, and for the government to reach that level it must strive to provide the appropriate opportunity for the development of the economic sector and to encourage businessmen to provide land at cheaper prices to set up their projects there in order to foster investment in Yemen, and this will not come about except by providing security and safety which is the first requirement of any investor and that’s what the government of Yemen should learn in the near future in order to change the condition of the country.
سليمان وحيد
2012-5-29
The States of Yemen face great challenges in various aspects of life, especially in the economic aspects, and represent a challenging economic threat to the development of Yemen and hinder the capacity of the Arab world to adapt to global changes and meet the challenges of peace and combat terrorism and protect itself from adverse changes in economic field. Economic challenges are the developments, variables, problems or difficulties or obstacles to economic or related economic dimension stemming from the local, regional or international environment and posing a threat or danger to future growth and economic development. The challenges faced by Yemen constitute, first, the limited Arab resources and their poor utilization; the escalation of unemployment rates: a rising unemployment rate in Yemen is one of the most serious challenges facing the Arab world in light of the current economic changes. Unemployment has spread to varying degrees, growing among graduates of higher education and a greater proportion beyond limits. Corruption is an economic, social, and political problem, and corruption causes flaws in economic efficiency, because of the results of the misallocation of economic resources and misdirected investment, as well as impeding investment and capital accumulation, and thus hinders the operations of economic and social development, as well as the consequent imbalance in the distribution of income and wealth among the members of the community, as well as the consequent negative effects of social and political effects, and those hinder reforms.
عباس خالد
2012-5-27
Yemeni citizens cannot relinquish any of their rights. They do not get their rights as citizens, so how can the members of those movements share with them the remainder of their rights, which they are supposed get by all means? The war of citizens with terrorism has begun and all citizens must cooperate in combating those that are sabotaging their homeland. They have to let go of their futile sit-ins. They have succeeded in ousting an entire regime and I am sure they will be able to eliminate those movements, which I think will not be more powerful than the Saleh regime. However, they are in fact more dangerous than the Saleh regime because they have adopted ideas that aim at demolishing people and destroying future generations of the nation. How can a nation do without new generations and how will it continue its journey without having people that make every effort to make their country the best it can possibly be and enjoy its resources alone? These movements are akin to parasitic organisms that feed on other organisms and they are hated very much in all societies. O Allah, make Yemen and all those who live in it secure. O Allah, take away sorrow from Yemenis. O Allah, Lift your wrath off of them, and tear down injustice and aggression, O Lord of the Worlds. O Allah, return to the citizens every land and every inch in their countries. O Allah, return good things to Yemen. O Allah, bless the poor and fed them from Thee, Lord of the Worlds, Amen.