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.

A couple of viewpoints on Pakistan

As a preview the upcoming US-Pakistan talks in Washington, we have a couple of viewpoints on the link between terrorism and poverty in Pakistan.

With many living in poverty in Pakistan some of those poor become easy recruits to the Al-Qeada and Taliban operations based there. Due to frustration and anger over their living conditions, they join groups who want to take violent action against those who they feel are keeping them poor. However, many military and state leaders say there is no link between poverty and terrorism.

The US gives 1.5 million dollars a year in humanitarian aid to Pakistan.

From CNN's Christine Amanpour show blog, we get two viewpoints of poverty and terrorism in Pakistan, first from Roshaneh Zafar, of the Kashf Foundation, and second from our favorite financier Jacqueline Novogratz of the Acumen Fund. Writer Tom Evans summarised the show on Pakistan.

"I personally think that addressing poverty, which is Pakistan's biggest problem today, is going to combat in some ways the issue of security that we face," Roshaneh Zafar, founder and president of the Kashf Foundation told CNN's Christiane Amanpour on Thursday.

"We worked with 1 million poor families across Pakistan, and we've seen what happens, the change that happens." She said even small increases in family incomes can transform society, because parents can then put their children in private schools.

"[By] putting in micro-finance, which is the most sustainable way of providing aid to low-income households, we are beginning to see a silent revolution take place both in terms of children going to school, their ability to actually transcend their social backgrounds and become professionals," she said.
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But Jacqueline Novogratz, founder and CEO of the Acumen Fund, which invests in development projects in Pakistan and elsewhere, cited the example of the huge progress she said is being made in housing construction in Pakistan as a result of initiatives by nonprofit organizations.

"I think that's where we're going to start seeing real scale. And then there's the scale of the human imagination," she said.

"Then there's the scale of frameworks that start with trust and credibility that both the United States and the Pakistan government have as an opportunity to show that they're there, that they care and they can make things happen."

Yemen economic meltdown leads to extremism

More on how poor economic have led to extremism from IRIN. This story analyzes the factors that have helped rebellion in Yemen.

From the Shiite rebellion in Saada in the north to the surge of secessionist movement in the south and the dangerous alliance forged between tribes and Al-Qaeda in the east, one factor unites analyses of the forces pulling Yemen apart: the failure of its economy.

“In my view, the root cause of all the problems from Saada to secession to Al-Qaeda is poverty,” Abdel Karim Aryani, long-time adviser to Yemen’s president, told IRIN. “No-one gets recruited free of charge. There is a religious appeal, but that only builds on people’s lack of income.”

An international conference in London last week called for “urgent and concrete action” by Yemen to address “conditions conducive to radicalization and instability”.

“The challenges in Yemen are growing and, if not addressed, risk threatening the stability of the country and broader region,” said the closing statement by a coalition of Arab and Western nations, including the UK, the USA and Saudi Arabia.

However, some say the job is made difficult by some daunting economic indicators.

No oil income from 2017?

In 2008, the state budget totalled 1.8 trillion Yemeni rials (about US$8.76 billion), according to Mostafa Nasser, chairman of the Economic Media Centre in Sanaa. Over three-quarters of that came from oil revenues.

Though ministers insist most of Yemen remains unexplored for oil, there have been only limited new discoveries in the past five years and production has fallen from 450,000 barrels per day (bpd) in 2003 to roughly 280,000 bpd at the beginning of 2009. The World Bank estimates that by 2017 the government will earn no income from oil.

According to a September 2009 report by the Carnegie Endowment entitled Yemen: Avoiding a Downward Spiral, half the population, which is set to double in 20 years time, is illiterate and earning less than $2 a day, and unemployment is hovering at around 35 percent.

Some health indicators, such as nearly half of Yemeni children being malnourished, are comparable to Sub-Saharan Africa

Unemployment and Al-Qaeda

Sheikh Abdullah al-Shareef, a tribal leader from the ancient temple city of Marib, 120km east of Sanaa and an operational stronghold for Al-Qaeda, sees a direct link between lack of work and the rise of militancy.

“The local people are jobless and they meet foreign Al-Qaeda who lead them. They say they are following religion, but in fact they are young and unemployed,” he said.

Sheikh Shareef also sees a rise in fundamentalism being driven by privately run religious schools which often fill the space left by inadequate state education.

An Islamic school in Marib established by Abu al-Hassan al-Masri, an Egyptian, continues to teach fundamentalist doctrine to Yemeni and foreign extremists, according to local journalists with knowledge of the school.

“These religious schools have been created to back up the educational system because there is a gap. Politically they have little effect, but personally I believe they increase sectarian ideologies,” said Sheikh Shareef.

Rebellion drains resources

Over the north, opinions vary as to the ideological motivations of the powerful Shiite Houthi clan and their followers whose five-year rebellion against the government in Sanaa has now displaced a quarter of a million people.

Mohammed al-Dahiry, professor of political science at Sanaa University, argues that while the Houthis see themselves as direct descendants of Prophet Mohammed and thus rightful rulers of Yemen, theirs is also a rebellion rooted in economic and social marginalization.

“This is what happens when the government does not do its job. In Saada there is no social development, not enough schools and hospitals. Peaceful opposition is restricted and so it leads to violence,” said Dahiry.

The war against the Houthis has drained resources from an already meagre state budget, with President Saleh warning in August that money for schools was now being used to build trenches for war. Parliament has suspended approval of the 2010 budget until the conflict is over.

Dahiry laid ultimate responsibility for Yemen’s failing state at the door of the international community, blaming the USA and Europe for spending money propping up Saleh’s regime, rather than on progressive development.

Dreaming of jobs

Yet as serious as the war against the Houthis has been, and as deadly as the threat is from Al Qaeda may be, it is the South Yemen secessionist movement which is the single most serious threat to the country’s long-term stability, according to a broad spectrum of Yemeni politicians and analysts.

“Partition will mean a return to war between the north and south every 10 years and war between the people of the south every five years,” said presidential adviser Aryani. “If there is secession, Yemen will become a hotbed of conflict.”

Despite some infrastructure investment and the opening of new schools in the south since unification in 1990 and the end of the civil war in 1994, Aryani and others say the secessionist movement - whose regular mass demonstrations have been fired on by security forces over the past year resulting in at least a dozen deaths - is driven by mass unemployment.

“Every man of 19 today has lived through unification. He never knew how much we all suffered from partition,” said Aryani. “The economic situation makes people think if they secede they will get a job the next day. On the contrary: If he has a chance of a job tomorrow, he will not have it next month.”

UK political skirmish on the international aid target of 0.7% GDP

An election is to be held in Britain next week. David Cameron of the conservative Tories is defending increasing international aid for poverty relief to his own party. Conservatives in the party are critical of the government making pledges to increase aid during the global recession.

Cameron knows that keeping the aid promise will win him votes amongst liberals next week. In making his point, Cameron is saying something very true, poverty eradication will lend to less terrorism.

From the Time Online, we hear the case from David Cameron, and reaction from aid watchdog groups.

An incoming Conservative administration would tie cash to proven results, fund a wider variety of projects and give the public a greater say in where aid was spent, he said yesterday.

Mr Cameron said that abandoning the UN target for countries to increase their aid spending to 0.7 per cent of GDP by 2013 would be a serious long-term mistake.

“When you look at some of the major threats to our security today — from terrorism to climate change to war — you know they will only get worse unless we help fight poverty and boost the development of struggling nations,” Mr Cameron said, as he announced the party’s aid strategy.
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But although aid charities gave a general welcome to the Tory aid policies, Mr Cameron was pressed on whether he would divert some of his proposed aid budget towards mitigating the effects of climate change.

“David Cameron must be clear that the sole purpose of these funds is poverty eradication. Funding specifically to deal with climate change must be additional,” said Melanie Ward, the senior UK political adviser to Christian Aid’s senior UK political adviser, Melanie Ward.