New IMF loan to Yemen

The international community has been putting a lot of money into Yemen. This began when an airplane bombing attempt in Detroit was linked back to a growing al-Qaeda cell in Yemen.

The International Monetary Fund just announced that they have made another loan to Yemen. The amount of the loan is 370 million dollars, of which 53 million will be given immediately.

From Bloomberg, writer Camilla Hall tells us more about the loan and why the IMF thinks that Yemen needs it.

Yemen’s government aims to rein in the fiscal deficit to 3.5 percent of gross domestic product while generating annual economic growth of 5 percent, the IMF said. The government is set to introduce a general sales tax and abolish exemptions on tax and customs duties to boost revenue. Tax evasion in Yemen is estimated at 80 percent, according to the Yemen Times newspaper.

“Yemen is confronted with a range of difficult economic challenges related to its heavy dependence on declining oil revenues, widespread poverty, and water shortages,” Naoyuki Shinohara, the fund’s deputy managing director, said in the statement. “The global financial crisis has aggravated these challenges through a reduction in world oil prices, resulting in mounting macroeconomic imbalances.”

Growth may accelerate to 8 percent this year from 3.9 percent last year, with non-oil output increasing 4.4 percent, according to IMF forecasts. The inflation rate may rise to 9.8 percent, the IMF said.