Yemen - Development Policy Review

Yemen is the second poorest country in
the Middle East and North Africa region, with 42 percent of
its population counted as poor in 1998. GDP has stagnated at
around US$530 per capita in real terms since 2002.
Unemployment, estimated at 11.5 percent in 1999, is expected
to have worsened as the population has climbed at 3 percent
a year and the labor force has burgeoned. Extreme gender
inequalities persist. Malnutrition is so severe that Yemeni
children suffer the world's second worst stunting in
growth. And natural resources are increasingly constrained.
Two-thirds of Yemen's known oil reserves were depleted
by 2003, and production has already begun to decline and
will plummet by 2012 if no new reserves are discovered.
Freshwater is also increasingly scarce: per capita
availability in Yemen is about 2 percent of the world
average and projected to diminish by a third in the next 20
years because of the expected increase in population.
Compounding these economic, social, and resource problems
are Yemen's policy and institutional failings, which
have prompted donors to cut aid. Yemen received a meager
US$13 in development assistance per capita in 2004. In 2005,
the Development Assistance Committee cut International
Development Association (IDA) 14 (2006-08) allocations to
Yemen by nearly a third, and the U.S. government's
Millennium Challenge Corporation suspended Yemen's
eligibility for assistance because of its worsening
corruption, regulatory quality, and fiscal policies. The
main challenges to Yemen's growth are the impending
rapid decline in oil revenues, the weak capacity of
governance institutions, the pressures of high population
growth, and the worsening scarcity of freshwater. The
country has yet to come to grips with the imminent oil
decline and its consequences. The Government is concerned
about governance problems and is recently attempting to
speed up reforms. The last two challenges-high population
growth and water crisis- are long recognized by the
government, but reforms have been slow.