Yemen approves sharp increase in 2012 spending

Reuters News
Posted: Apr 16, 2012 1:25 PM
Yemen approves sharp increase in 2012 spending

SANAA (Reuters) - Yemen's parliament on Monday approved a budget for 2012 that sharply increases spending to meet demands for more jobs and social services after a year of violent political protests.

Expenditure will leap by almost 50 percent from what the government had projected for 2011, before the violence erupted early that year.

The impoverished Arab nation has been seeking billions of dollars in financial assistance to meet immediate fiscal needs after the protests that forced President Ali Abdullah Saleh to quit office after three decades.

The IMF in early April approved a $93.7 million loan to Yemen, whose political unrest has caused its widespread poverty and unemployment to worsen and its tax revenue to plummet.

Saleh gave way to his deputy in February under the terms of a delicate power-sharing deal brokered by Yemen's Gulf neighbors with U.S. and U.N. backing.

The 2012 budget projects expenditure of 2.7 trillion Yemeni rials ($12.56 billion), up from the 1.84 trillion rials originally projected for 2011.

The government has been operating this year using last year's budget, and the finance ministry has yet to post actual spending figures for 2011 on its website.

Revenue this year is forecast to rise 38 percent from the previous year to 2.1 trillion rials, while the deficit would rise 72 percent to 562 billion rials.

The protests have prompted the government to increase social spending and state jobs, while damage caused by the violence has added yet more expenses.

The 2012 budget, approved by the cabinet last month, was delayed by disagreements among the country's lawmakers over the government's pricing of oil derivatives. Politicians wanted the government to reduce diesel prices and a joint committee has been formed.

Yemen earlier said the new budget included 65 billion rials for unpaid wage increases to public sector employees dating back to 2005-2010 and 21 billion rials for increases that had been slated for 2011.

The unrest cut into Yemen's modest oil exports, a main source of the foreign currency it uses to import staple foodstuffs.

In February, Yemen's planning minister told Reuters the current deficit was equal to more than 10 percent of gross domestic product and that $1.8 billion was needed immediately to prop up the weak currency.

The International Monetary Fund earlier forecast that Yemen's budget gap would shrink this year to 6.1 percent of economic output from an estimated 7.1 percent in 2011.

Potential donors including Yemen's wealthier Gulf Arab neighbors, who crafted the power transfer deal under which new president Abd-Rabbu Mansour Hadi took office, are expected to meet in Saudi Arabia in May. The conference will also include the United States.

(Reporting by Mohammed Ghobari; Writing by Rania El Gamal; Editing by Patrick Werr)