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

Abstract 19

This paper represents an attempt to analyze current situation and future trends in public spending on education and health services as reflected in the Economic, Financial and Administrative Reform Program which has been adopted by the Government since early 1995. In the short-run, provisional indicators show relative success in achieving the foreseen goals of accomplishing financial and monetary stability. However, sustaining this success in the medium and long terms is a different matter. It rests on the Government’s ability to preserve economic stability, improve social indicators, continuously creating job opportunities, and reducing the severe poverty in the society.

On the other hand, economic reform programs should not regard economic growth as the ultimate objective, but rather aim at sustainable human development, which comprises two dimensions. While the first relates to creating human capabilities such as improving knowledge and skills and the level of health services, the second dimension emphasizes the individual’s use of those capabilities in production as well as in political and social participation. Hence, more attention needs to be diverted towards education and health as a means of raising human skills and efficiency, thus enabling the majority of population to become active agents in the society.

Social sectors in Yemen, in particular education and health, face great challenges and large imbalances. Despite realized improvement during the last three decades in providing those services, many difficulties still persist today. There is a need to intensify government and private sector’s efforts in order to resolve and reduce those bottlenecks. The main bottlenecks are:

Services not reaching all groups, especially those in remote and deprived regions.

Continuous deterioration of these services provided by public enterprises (in both level and quality) in the various Yemeni regions, thus leaving negative impact on the development of human capability.

Dearth of financial resources required to finance public spending on those sectors.

This paper, therefore, focuses on the third challenge, investigating the effect of the reform program on the availability of resources allocated to health and education spending. Public spending in general, and in particular on health and education is characterized by some deficiencies which reflect the imbalances in spending policy, budget structure, and sectoral budgets. These characteristics can be summarized in the following:

Current expenditures make up the majority of spending at the expense of capital and development expenditures.

Very low allocation for maintenance and operational purposes.

Continuous decline of expenditures in real terms vis-a-vis expenditures in nominal value.

Because of the above, public spending in both sectors requires restructuring that would enable allocating more funds to operation, maintenance and capital uses, as well as reconsidering raising of wages and salaries to a realistically rewarding level, in particular with regards to specialized cadres. Also, incentives for those working in rural regions and remote governorates require reassessment.

Moreover, when comparing some indicators at the governorate level, we see the urgency of improving the spending mechanism and system in social sectors. There is also the need to follow a decentralized method that grants communities more say in allocating and administering funds according to their needs and priorities. It is expected that a component of the reform program will address this issue while, the Local Governance Law is to be ratified by the parliament some time this year.

A strategy for both sectors should therefore redefine the role of the relevant line ministries by reforming the existing administrative system towards more decentralization. Second, the state should shift from being service provider into a facilitator with the intention of increasing the role of the private sector and communities at the local level. Also, more resources should go to remote regions and low income groups. And finally, it is quite important for this strategy to incorporate ways of mobilizing financial resources. It is also vital to target non-classical sources such as Zakat (Islamic tithing) and endowment. Historically, both sources have had a major role in financing social services, specially when localities and non-governmental organizations were authorized to allocate and administer these revenues.