The Houthis prevented oil exports and the Brotherhood thwarted the government's efforts to reform the economy
English - Wednesday 09 November 2022 الساعة 09:11 am
Mocha, NewsYemen, private:
The Yemeni government is now facing the prospect of a new economic crisis that threatens to undo the progress made in recent months, as oil exports have been disrupted by Houthi attacks on the ports of Shabwa and Hadramawt, while the Islah war, the Muslim Brotherhood's branch in Yemen, has thwarted the government's economic reforms.
The freezing of crude oil exports and sales comes just weeks after failed attempts by the government to implement its planned economic reforms, as the Muslim Brotherhood, which controls the Marib governorate, opposed the government's efforts to liberalize the prices of locally produced oil derivatives.
They called on the government to cancel its decisions, arguing that citizens cannot bear any additional burdens during these difficult times, and this failure threatens to thwart other reforms, including the liberalization of the exchange rate between customs and the dollar and the rise in service prices.
To increase sales of oil derivatives, the government was asked to liberalize the prices of oil derivatives produced locally in the Ma'rib governorate or raise their prices to match global market prices.
The World Bank and active external donors in Yemen had called on the Yemeni government to carry out economic reforms, to launch a package of financial and development assistance to Yemen, to get out of the difficult economic situation, and to improve living conditions and the exchange rate.
Since 2015, local authorities in Marib governorate have maintained a set price for locally produced gasoline: 175 YR per liter, while in parts of the country and government-controlled areas, the price of a liter of imported gasoline currently ranges between 950 and 1,100 YER.
It is difficult to estimate government losses due to the low price of locally produced gasoline in Marib and the fluctuation of the cost price in global markets throughout the year.
Considering the current price in international markets and estimating the production of the safest refinery in Ma’rib Governorate at 700,000 liters of gasoline per day, it can be concluded that the government loses approximately 198 billion Yemeni riyals annually.
The money that the government loses for not liberalizing the prices of oil derivatives in Marib, represents about 16 percent of the total government revenues in the first half of this year.
The government's compliance with the demand of the Marib authorities and tribal leaders not to liberalize the prices of oil derivatives is likely to put it in a strange position with other oil-producing governorates, such as Hadramawt and Shabwa.
The governorates of Hadramawt and Shabwa claim the same concessions as Marib, arguing that it produces more oil than Marib and deserves to be treated on an equal footing.
Also, residents of government-controlled areas may be less receptive to the expected economic reforms due to this unequal treatment, most notably the adjustment of the customs dollar exchange rate and the increase in the prices of public services.
In its paper, "Yemen returns to square one with a new public financial crisis approaching," the Emirates Policy Center says that the government's failure to implement decisive reforms raises doubts about the feasibility of plans pushed by the central bank leadership in Aden to address the repercussions of the disruption of crude oil exports in the country and the reform agenda.
The economic reforms pursued by the government, and the recommendations of international experts, have brought the national economy out of the cycle of deflation and stagnation that it has experienced over the past six years, and has achieved a growth of 2% this year, according to data from the World Bank.
The economic reforms that the Muslim Brotherhood failed to do were crucial changes that, if implemented, would have resulted in significant new revenue for the government, enough to fill the gap in the public budget and generate a large surplus that could have been used to improve the overall efficiency and effectiveness of the government.
