16 April, 2014

Yemen: Of Fuel Prices And The Daily Demonstrations

Hardly does a day pass without some kind of public demonstration - for one reason or another - taking place in Sanaa. Some times only a handful demonstrate; and some times thousands participate. Almost, always - the demonstrators walk down streets shouting or chanting; and always traffic gives way to the demonstrators. A few days ago, several hundred, very angry people demonstrated along the streets of the city; this was against the government's intention to lift fuel subsidies. As usual, the demonstration was started by a few people and as it moved along the streets, participants increased. All were very angry at the goverment for the planned increase in fuel prices. And those watching the demonstrations along the sides of the streets, were just as angry. With most Yemenis being as poor as they are, always, any talk of increasing fuel prices is never accepted.

Who can blame these demonstrators? An over whelming majority of Yemenis can never support any increase in fuel prices. Most Yemenis view it as 'increasing fuel prices' and thus increasing hardship and misery; and not as economists, the World Bank and the IMF whose thinking is 'lifting fuel subsidies' and hence improving the country's economy. For years, the Yemeni government has been caught in a very complicated and seemingly unsolvable quandary: economists and the goverment believe that one of the best ways of lifting Yemen out of its very bad, dire economic predicament - is to lift fuel subsidies, increase fuel prices and save badly needed money. They have very good reasons for this: Yemen has one of the highest fuel subsidy rates in the world; the IMF predicts that, this subsidy will cost the government $3.5 billion in 2014; they say that the Yemeni government cannot afford it as it has a deficit of more than $3.2 billion in its present annual budget. The very low fuel prices in the country, also makes it very profitable to smuggle fuel to neighboring countries (including to Saudi Arabia).

However - any removal of the fuel subsidies will have a drastic domino effect: the prices of almost all necessities will increase. The more the increase in fuel prices, the more these prices will rise: food prices (most locally grown food in the country is produced using irrigation which uses generators to pump water), transport, electricity bills, cooking gas prices will all rise; which in turn will make house rents to be increased by landlords to cushion themselves; which in turn will cause clinics, pharmacies and all other medical centers to increase what they charge; educational products and institutions will do the same to make up for the increasing costs of maintaining and running their services and facilities. In all these increases -- while the rich and the powerful have ways of managing any fuel or other price increases -- it is the majority of the simple, common Yemenis (who already face extreme deprivation) who will face even more hardships and misery. For now, notwithstanding the continuous international pressure to lift fuel subsidies and it being a necessary requirement for the country to improve its economy - the Yemeni government has just announced it will not go ahead with its plan of increasing fuel prices.