Supporting a controversial economic reform agenda
Both the World Bank and IMF are pursuing a dramatic economic reform agenda in Yemen that could have significant direct impacts on Yemenis' daily life. While these institutions insist that they are supporting the government's own reform plans, such programs are often developed at the behest of the the Bank and Fund in order to qualify for increased donor aid.
In 2007, the World Bank approved a $50 million "development policy" grant, which is the latest manifestation of the hotly contested Structural Adjustment Programs of the 1980’s and 90's. While citizens are often affected the most by these policy changes, decisions are usually made behind closed doors between the World Bank and the government. However, as opaque and distant as they may seem, policy reforms can have very direct – and at times, dire – consequences for a country’s population.
Yemen has had a turbulent experience with such programs. In 1995, the Yemeni Government, acting on advice from the World Bank and the IMF, carried out a structural adjustment program which led to a significant increase in the price of basic goods and services, ultimately resulting in widespread unrest in which 52 people were killed and hundreds wounded.
By accepting the grant, the Yemeni government has agreed to implement policy changes suggested by the World Bank and the IMF. The reforms would include ending fuel subsidies by 2010, doubling the General Sales Tax rate to 10 percent in 2009, cutting government wages and salaries by 1.6 percent of GDP, and introducing a new land registration law which could dispossess poor Yemenis who live on and farm lands without holding a legal title.
Expanding role of the IFC
The International Finance Corporation (IFC) is the private sector arm of the World Bank Group that invests in private companies. While Yemen joined the IFC in 1970, nearly all of the $165 million worth of IFC investments to date were made since 2005, when it opened an office in Sana’a.
Most of its investments are directed toward support for large companies involved in cement, oil and gas production. In 2006, the IFC approved investments in the HSA National Cement Company and the Ras Issa Refinery, which are owned by the same Yemeni investors, the HSA Group (Hayel Saeed Anam Group). This reflects the IFC's decision to cooperate mainly with prominent private firms in Yemen, after it “suffered in the past from dealing with weak sponsors.” The IFC's apparent unwillingness to invest in smaller, less-established companies highlights a longstanding critique of the institution, which prefers to invest in large projects that pose minimal risk.
Considering the recent increase in IFC investments in Yemen and its plans to scale up financing in the MENA region overall, the coming years might witness an even further rise in IFC involvement in Yemen.
Promoting private investment in the water sector
The World Bank, through both its project and policy lending, has encouraged greater private sector involvement in the provision of water services throughout the MENA region. In Yemen, the World Bank is currently financing a $130 million project to support “the creation of opportunities for increased private sector participation” in urban water services.
Private sector participation in the water sector through privatization and public-private partnerships (PPP) has proven a highly contentious issue in many countries, as it has often led to higher prices and reduced access for the poor. This is even more problematic in Yemen which, according to the Bank itself, has one of the lowest rates of per capita freshwater availability in the world.