Yemen reform plan still broadly in line with IMF loan terms: Lagarde
The Yemeni government's deal with Houthi rebels is broadly in line with conditions of a loan provided by the International Monetary Fund, despite the rollback of some subsidy cuts, IMF managing director Christine Lagarde was quoted as saying.
The IMF agreed in July to provide a $553 million loan to Yemen over the next three years after the government made ambitious economic reform pledges, including a reduction of about 50 percent in fuel subsidies and higher tax revenues.
But sweeping fuel price hikes helped to trigger political unrest; over 100 people were killed in clashes in the capital between Shi'ite Houthi rebels and army troops last month. Weeks after introducing the price hikes, Sanaa reversed a large part of them.
The rebels signed an agreement with other political parties in September to form a more inclusive government, and it is not clear whether the new government will be much interested in pushing economic reforms.
But Lagarde, in the IMF's first direct, public comment on the latest Yemeni policy changes, said they did not endanger the loan program.
"The economic content of the recent agreement between the government and the Houthis is broadly consistent with this program," Lagarde told Saudi Arabian-owned daily newspaper Asharq Al-Awsat in an interview published on Monday.
"Despite some reversal in fuel price increases, the net savings in the subsidy bill remain substantial and will allow to increase spending in infrastructure and the Social Welfare Fund," she was quoted as saying.
Lagarde also said: "The national ownership of the reform process is key to success, as is continued strong support from the Friends of Yemen" group of international aid donors.
Sanaa's finances have deteriorated rapidly this year as attacks on oil pipelines by tribesmen and militants deprived the state of revenue and resulted in severe fuel and power shortages that wrecked a fragile economic recovery.
The government hopes the IMF loan deal will help it unlock more funds from international donors, which have been slow to arrive. Of some $8 billion pledged for the 2012-2015 period, only about a third has been disbursed.
The IMF has warned that Yemen's fiscal deficit would reach 9 percent of gross domestic product in 2014 and foreign reserves would decline to well below three months of imports in the absence of economic reforms.
- Oct 06, 2014