Yemen oil export income tumbles 64pc

July 07, 2014 - 1:23:25 am

DUBAI: Yemen’s income from oil exports tumbled by over 64 percent to $73.4m in May from a year ago, due to attacks on an export pipeline, and the central bank’s foreign asset reserves shrank to their lowest since end-2011, data showed yesterday.

Sanaa’s finances have deteriorated as it has been caught in a nationwide fight against al Qaeda militants and other rebel groups. It has suffered power cuts and petrol shortages with the government struggling to pay public sector salaries and finance food and energy imports.

It relies on crude oil exports to finance up to 70 percent of its budget. Sanaa has earned just $671m from exporting its crude in January-May, nearly 40 percent less than in the same period last year, the central bank’s monthly report showed.

As a result, the central bank’s gross foreign asset reserves slipped for a sixth month in a row to $4.6bn in May from $4.7bn in April, reflecting the state’s failure to secure oil pipelines against bombings. That level is enough to secure 4.4 months of imports but bellow 7.6 months on average Yemen recorded in 2007-2013.

When deducting liabilities, which include Saudi Arabia’s $1bn deposit from 2012, the central bank’s reserve cushion is much lower, at $3.3bn in May. Overall, Yemen’s banking system held $5.6bn in net foreign assets in May.

Financial aid from abroad, which has been slow to arrive, has become a lifeline for Yemen, the second-poorest Arab nation after Mauritania. Sanaa is hoping to seal a long-discussed $550m loan from the International Monetary Fund this year that could help unlock more donor funds.

The IMF expected in April Yemen’s budget deficit to shrink to 6.7 percent of gross domestic product this year from 7.1 percent in 2013, which was the biggest shortfall since 2009.

Inflation eased to an annual 7.4 percent in April from this year’s peak of 7.6 percent in the previous month, as growth in prices of food and non-alcoholic beverages cooled slightly, the central bank’s report also showed.

Core inflation, which excludes volatile prices of food, tobacco and qat leaf, remained at 10.7 percent in April for the second month in a row, the highest level since August 2012. That seems to rule out further monetary policy easing for now.

The central bank slashed its key rate by 5 percentage points from October 2012 to February 2013 to support economic recovery, bringing it to a three-year low of 15 percent. 

Headline inflation averaged 7.1 percent during this period and core inflation 7.3 percent.