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Yemen to review state firms, curb travel in austerity drive

Source: Reuters - Thu, 10 Jul 2014 12:54 GMT
Author: Reuters
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* Government to assess viability of state-owned companies

* Public sector recruitment frozen, military unit to tackle tax evasion

* Oil drilling costs to be reviewed (Adds diplomat's comments)

By Martin Dokoupil

DUBAI, July 10 (Reuters) - Yemen's president unveiled a series of austerity measures, including a review of state-owned companies' viability and ordering ministers to fly economy class, to ease pressure on the state's crumbling finances.

Sanaa has struggled to pay public sector salaries and finance food and energy imports, which has led to power cuts and fuel shortages as a fight against al Qaeda militants and other rebel groups undermines the state budget.

In a statement late on Wednesday, the government described President Abd-Rabbu Mansour Hadi's package as urgent.

It did not say how much it expected to save, how it would review state firms or when results might be seen.

"It is difficult to put a number on it but we expect to save billions of Yemeni rials," Mohammed Albasha, spokesman for the Yemeni Embassy in Washington, told Reuters.

Among the measures, recruitment has been frozen for all state institutions, procurement of cars has been halted, and international travel for senior officials will be restricted.

"Government officials, including ministers, are to be limited to a maximum of four overseas trips a year," the statement said. "State officials are no longer permitted to travel first or business class."

Hadi has been trying to stabilise the country for over two years, after political and economic turmoil forced his predecessor to step down. But the state's push against Islamic militants and rebels has sparked attacks on crude oil pipelines that are key to obtaining up to 70 percent of state revenues.

Sanaa earned just $671 million from exporting crude oil in January-May, nearly 40 percent less than in the same period last year. The central bank's foreign asset reserves have shrunk to $4.6 billion, the lowest level since end-2011.

The government's statement said it would create a specialised military unit from its special forces to help combat tax and customs evasion in a country that is awash with weapons.

At the same time, the finance ministry is to review the tax collection process and resolve tax debts.

The government did not announce any fresh measures directly aimed at reducing widespread corruption, which is a major drain on state funds.

ENERGY SECTOR

The second-poorest Arab nation after Mauritania is hoping to secure a long-discussed loan from the International Monetary Fund that could help unlock more donor funds, held back by fears of corruption and a lack of progress in economic reforms.

Yemen's finance minister told Reuters in May that the country was seeking "substantially more" than the $560 million which the IMF proposed, and that the Fund's board was expected to finalise the deal in July.

The IMF has pressed Yemen to cut the energy subsidies which cost it $3.07 billion last year, equivalent to 30 percent of state revenue and 21 percent of expenditure.

But reducing subsidies is hard in a country where a third of the population of 25 million lives on less than $2 a day, and this week's austerity package did not address subsidies.

Instead, it said the government would review the cost of drilling and extracting crude oil to bring it down to global averages, while the ministries of defence and interior would work to resolve security problems at production sites.

The president also banned the state-owned Public Electricity Corp, which operates most of Yemen's power generating capacity and the national grid, from building new diesel power plants, leasing them or financing expansion of current ones.

"The government must work on expanding gas and coal powered plants to replace diesel plants. Plans to install and operate Mareb's Second Gas Powered Station by the end of January 2015 will be expedited," the statement said.

($1 = 214.85 Yemen Rials) (Editing by Andrew Torchia and John Stonestreet)

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