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

Abstract 29

The importance of this topic lies in the fact that the Economic Reform Program takes priority among government policies. The Government has adopted an economic stabilization and structural adjustment program in collaboration with the IMF and the World Bank which provide assistance and technical support to the program. The necessity of implementing such a program stems from the difficulties suffered by the economy as a result of deterioration in the economic imbalances. The most important is the relation between the population growth rate and their growing needs on the one hand, and the level of domestic production specially agricultural output and food, on the other. Such imbalance creates an increasing dependence on the external world in order to meet the needs of the population. It also exerts strong and continuous pressure on the country’s limited foreign exchange resources and reserves.

This paper looks into the following points:

The Economic Reform Program

The political dimensions of the program.

The political consequences of the program.

Regarding the Economic Reform Program, the paper discusses the need for a new strategy that is capable of improving the economy’s efficiency, and to achieve higher economic growth and thus higher standards of living, as well as regain confidence in the economy and ensure economic stabilization. For this purpose, emphasis is directed to include ways and means to encounter the causes of macroeconomic imbalances.

As for the political dimensions of the Economic Reform Program, this paper shows that these dimensions are closely linked to events and developments currently taking place in the Arab region, and which are expected to leave many long term impacts. Hence, the Government has to study carefully these events and their potential influence on the Yemeni economy and on the implementation of the Economic Reform Program. Moreover, the Government ought to discuss and enhance cooperation with specialized institutions in an attempt to create a conducive environment for growth and for the implementation of the program.

However, it has to be stated here that the political dimensions of the Economic Reform Program will inevitably create secondary, interchangeable political and social impacts during its implementation. These impacts might create forces to divert the program from its proclaimed goals, and which will bring the Government to take difficult political decisions in order to carry on with the program. In order to achieve this, the Government needs to acquire the political will.

The paper concludes with the positive and negative political impacts resulting from the program. The positive ones are reflected in achieving political stability pending on economic solutions that pull the economy out of the crisis which prevailed during the period prior to 1995. Also, of the positive impacts expected from implementing the program are: the improvement in the role of public enterprises that are influential in the economic activity, saving resources that were allocated to subsidizing some goods and services, and reallocating these resources to support development purposes and the vulnerable groups of the society. The negative impacts are summarized in changes in the nature of social coalitions in society as well as other social, political, and economic impacts that affect various social groups, not to mention the growing linkage with the world economy which limits options and freedom in adopting independent decisions.