The Second Yemeni Economic Conference
Sana'a  18 - 20 April, 1998

Abstract 10:

Economic, Financial and Administrative Reforms:
Stages, Procedures, and Results

Dr. Ahmed Ali Al-Bishari
Assistant Professor
Dept. of Economics
Sana’a University

Lots of talk have been recently taking place, and specifically since the early 1995 on the economic, financial, and administrative reforms in the Republic of Yemen. Reforms have become a fertile subject specially when political discourse intervened with economic and objective considerations. Furthermore, the reform program has been utilized as an official vehicle to address the outside world to provide assistance to help Yemen out of its economic crisis, with the blessing and support of some donor countries and regional and international finance institutions.

At the same time, these reforms have been employed as an internal instrument to convince the public of the achievements of the successive governments. These governments adopted and defended reforms in order to stop economic deterioration, reduce budget deficit, resolve the country’s foreign debt, control inflation, stabilize the domestic currency vis-a-vis foreign currencies at adequate rates, and accomplish macroeconomic stability.

But, on the other hand, economic reforms have been used as a weapon in the hands of the opposition and some other parties in the coalition. These parties focused on the negative aspects resulting from these reforms such as the decline in per capita income, the expansion of the low income group at the expense of the middle class, and the limited effect of government measures in fighting financial and administrative corruption.

However, and regardless of political exploitation and party tactics that have flourished under the democratic climate, political plurality, and freedom of press, this paper aims at addressing and objectively evaluating - in a scientific methodology - the experience of economic reforms in the Republic of Yemen since the implementation of the first phase in March 1995. Then it discusses the experience of the second phase in January 1996 carried out by the coalition government of the PGC and Islah, and concluding with phase three launched by the PGC government in May 1997. The current government believes in and understands the importance of continuing the reform efforts as a necessity, forced by the current economic situation and justified by the promising future.

Whilst the reform measures of phases one and two (March 1995- July 1997) have touched directly the living standards of the individuals in the society, as a result of reducing government subsidy leading to increased prices of goods and services, measures of phase three (August 1997- December 2000) rely basically on resolving administrative, structural, and legislative aspects. It also includes a long term and gradual subsidy reduction plan that takes place parallel to establishing and enhancing a social safety net that aims at alleviating the negative consequences resulting from the implementation of the Economic Reform Program.

The main objectives to be anticipated from writing this paper are the following:

Observing internal interactions towards economic reforms in general, and specifically towards its programs in all three phases. This can be done by considering the positions of the various political forces and in particular the political parties as reflected in their election programs and party manifesto. It is equally important in this context to examine the contents of the programs of the consecutive governments during the period, upon which these governments obtained the vote of confidence from the parliament. A special consideration is given to present the goals and results of the “National Program for Construction and Political, Economic, and Administrative Reform” launched in 1991.

Noting external interactions represented in the positive and fruitful reaction reflected in the direct support of both the IMF and the World Bank, who also supervise the measures being implemented in the Reform Program. Similarly, the interaction of donor and friendly countries which organized or participated in the conferences in Brussels, Geneva and Paris to gather support in the form of financial and technical assistance to the local efforts exerted by the Government to resolve the economic problems, and head towards sustainable development under a noticeable economic and political stability.

The paper concludes with a set of recommendations reached through the scholarly and practical observation of the measures and policies followed during the three phases of economic, financial, and administrative reforms.