VZCZCXRO0021
PP RUEHDE RUEHDH RUEHDIR
DE RUEHYN #2072/01 3210733
ZNR UUUUU ZZH
P 170733Z NOV 09
FM AMEMBASSY SANAA
TO RUEHC/SECSTATE WASHDC PRIORITY 3214
INFO RUEHZM/GULF COOPERATION COUNCIL COLLECTIVE

UNCLAS SECTION 01 OF 02 SANAA 002072 
 
SENSITIVE 
SIPDIS 
 
NEA/ARP FOR ANDREW MACDONALD 
USAID FOR CHRIS KISCO 
DEPT OF TREASURY FOR BRIAN MCCAULEY 
USTR FOR JASON BUNTIN 
DEPT OF COMMERCE FOR TYLER HOFFMAN 
USTDA FOR CARL KRESS 
 
E.O. 12958: N/A 
TAGS: ECON EAID PREL PGOV YM
SUBJECT: DONORS QUESTION ROYG COMMITMENT TO DEVELOPMENT 
 
REF: SANAA 1549 
 
¶1.  (SBU) Summary.  Donors questioned the pace of Yemen's 
development in a meeting with visiting World Bank Middle East 
and North Africa (MENA) Vice President Samshad Akhtar on 
November 7.   Akhtar responded to donor concerns, emphasizing 
that the ROYG appears to understand its development issues, 
but may need more time to establish political consensus on 
sensitive items like removing fuel subsidies.  Meanwhile, 
visiting IMF Economist Todd Schneider stressed that the 
fiscal deficit will be a real budgetary issue in 2010.  In 
the wake of visits from the World Bank MENA VP and the IMF 
Mission, the ROYG's disjointed approach to economic 
development appears all the more glaring, as the ROYG has yet 
to prove itself as a committed development partner.  End 
Summary. 
 
DONORS, WORLD BANK, AND IMF LAMENT DEVELOPMENT 
--------------------------------------------- - 
 
¶2.  (SBU) In a meeting with visiting World Bank Middle East 
and North Africa (MENA) Vice President Samshad Akhtar on 
November 7, donors spoke candidly about economic reform 
issues, bemoaning the pace of Yemen's development.  Donor 
laments covered the large swath of issues affecting Yemen, 
ranging from stability to more traditional development 
subjects like the need for increased donor coordination.  The 
UN representative alarmingly summed it up, stating that 
"Yemen is not on track for any single Millennium Development 
Goal (MDG)."  Overall, the emphasis was that action - on both 
the part of the ROYG and donor community - needs to happen, 
and soon. 
 
¶3.  (SBU) The World Bank's Akhtar responded to donor 
concerns, emphasizing that the ROYG appears to understand its 
development needs, but may need more time to establish 
political consensus on sensitive items such as removing fuel 
subsidies.  Akhtar suggested the ROYG needs to balance macro 
problems with overall development, and identified problems 
with land registration, alarming levels of qat consumption, 
and water scarcity as fundamental causes of instability. 
When VP Akhtar suggested that she start a dialogue process 
now and return in February, donors protested the waiting 
period, stating that the need for better donor coordination 
should not wait, but commence now.  The World Bank indicated 
more resources (up to USD 200 million) could be generated 
this year for existing programs, making the need for 
coordination even greater. 
 
¶4.  (SBU) On the heels of the World Bank visit, an IMF 
mission (in town for the Article IV consultation) stressed 
that the fiscal deficit will be a real budgetary issue in 
¶2010.  (Note: The IMF conducts annual "Article IV 
consultations" to assess the health of a country's economy 
and forestall any future financial problems.  End Note.) 
According to the IMF team leader, the ROYG continues to 
suffer from a rigid expenditure structure, low (to no) tax 
collection, and a continued dependency on oil revenues. 
Todd Schneider, Chief Economist who works on Yemen for the 
IMF, said on November 9 that the ROYG has already "pulled out 
all the stops" in terms of managing public debt, issuing 
treasury bonds, and Central Bank financing (printing money). 
Without much room for recovery, he predicted the ROYG will 
develop a much higher deficit and accrue arrears in 2010, 
unless it implements drastic changes. 
 
ROYG APPROACH APPEARS DISJOINTED 
-------------------------------- 
 
¶5.  (SBU) In the wake of visits from the World Bank MENA VP 
and the IMF Mission, the ROYG's disjointed approach to 
economic development appears all the more glaring.  The 
Ministry of Planning and International Cooperation (MOPIC) 
has a development program embodied in the Socio-Economic 
Development Plan for Poverty Reduction (DPPR), the Public 
Investment Programme (PIP), and the showcase National Reform 
Agenda (NRA).  Yet, coordination with the donor community in 
the implementation of these programs and the will to address 
major development issues is distinctly lacking, particularly 
in the difficult sectors such as addressing fuel subsidies, 
land registration, qat overuse, and water scarcity. 
 
¶6.  (SBU) Since August of this year, a parallel development 
program, "Yemen's Top 10 (Economic) Priorities," has gained 
national attention (REFTEL).  Developed by a group of 
 
SANAA 00002072  002 OF 002 
 
 
reform-minded economic advisors to President Saleh, the plan 
was created outside of the traditional development apparatus. 
 While it has received the President's blessing and gained 
popularity among Western donors, it has not won many allies 
in MOPIC, where some officials believe it is not feasible to 
achieve the initiatives outlined with an eighteen-month 
timeframe.  (Comment: Underlying this criticism may also be a 
certain resentment that the Ministry was not consulted 
thoroughly in its development.  End Comment.)  With a 
disjointed development apparatus, the ROYG has left the donor 
community without a clear sense of its development policy, 
since it lacks a coordinated and agreed-upon strategy. 
 
¶7.  (SBU) Comment.  There is a strong desire among the donors 
to coordinate more closely and identify joint programs with 
common goals.  Despite partnering with USAID in the 
conceptualization of its new three-year stabilization 
strategy, the ROYG has yet to prove itself as a committed 
development partner to the donor community at large. 
Although some donors are treating the "Top 10 Priorities" as 
a subset of the National Reform Agenda (NRA), the donor 
community could use a clearer message from the ROYG regarding 
development policy.  Ideally, that message would be a 
holistic approach to development, coordinating within the 
ROYG and with the entire donor community.  End Comment. 
SECHE