Articles 61, 73, and 87 of the Yemeni Constitution discuss fiscal processes within the country. The House of Representatives is charged with approving the socio-economic plan, and approving government budgets and final accounts. The House is not to be adjourned before endorsing the General Budget. This budget is to be submitted to the House of Representatives at least two months prior to the beginning of the fiscal year, and it is voted on by section. If the budget is not approved before the new fiscal year, the previous budget is enacted until such time as the new one is approved. Moreover, the law is to specify the means for budget preparation. The authorities were gradually increasing financial transparency in 2005 by consolidating a number of extra budgetary funds and other special accounts. To meet the structural challenge of declining oil production and revenues (which accounted for 72 per cent of government revenues in 2003) they were introducing a more streamlined general sales tax for parliamentary approval.
The Central Organization for Control and Auditing (COCA), under the auspices of the Ministry of Planning and Development, oversees most financial management in the country. The Act of the Central Organization for Control and Auditing, Act No 39 of 1992, defines COCA’s primary roles as: carrying out effective control over public funds; ensuring sufficient management with “due regard to economy, efficiency, and effectiveness; contributing to enhanced performance of public sector entities; and further improvement of accountancy and auditing in the country."
The Parliament approved a law in 2006 establishing the National Authority of Tenders, Bidding, and the State’s warehouses. This independent technical committee for tendering was then reinforced by law 39 (2006) establishing the Supreme National Authority for Fighting Corruption, an independent eleven-person body elected by parliament.
The Central Bank of Yemen exercises supervisory authority over the commercial banks. It also manages the public debt, advises the government on economic and financing policies, and publishes financial and economic data. A banking law passed in 1998 gives the Central Bank more independence to perform its role of supervising the banking system and to address prudential concerns, notably by setting limits on credit concentration and insider lending. Fourteen commercial banks and three specialized state-owned development banks operate in Yemen. Currently, most of Yemen’s majority state-owned banks are undergoing a thorough restructuring process, to be followed by privatization.
Parliament passed an anti-money laundering law in 2003 that sets prison terms of up to five years for people convicted of money laundering and allows for the extradition of non-Yemenis. The president established an anti-money laundering committee to implement the law. Yemen was a founding member in 2004 of the Middle East and North Africa Financial Action Task Force (MENAFATF), a part of the global network to combat money laundering and terrorist financing.
The IMF expressed satisfaction in 2005 with the Central Bank’s supervision of the commercial banks. Nonperforming loans, which constituted 44 per cent of total loans in 1999, were reduced to 29 per cent of the loan portfolio in 2003.
The General Investment Authority establishes licensing procedures, eases direct investment projects, and facilitates foreign investment. The privatization law promulgated in November 1999 called for a High Commission and a Technical Privatization Office (established in 1996 and formally reestablished by ministerial decree in March 2000) to guarantee standardized, unbiased, and transparent privatization. A government-sponsored privatization program was slated to include 47 companies, including five large state enterprises, the Aden Refinery, the Airport Ground-Handling Services, the General Land Transport Company, the Yemen Cement Company, and the Yemen Drug Company. In mid-June 2001, however, the Yemeni government decided not to privatize the refinery or the transport or cement company, contrary to the advice of the World Bank.
Yemen has no public stock exchange.
The Y21F is an organization that aims to serve as a catalyst for mobilizing the efforts of Yemenis and foreigners residing in Yemen in support of the democratization and modernization process that the country is undergoing. This think tank was established in 1999 and has potential for attracting foreign direct investment and encouraging privatization.
International Transparency Standards
Yemen has participated in the IMF’s General Data Dissemination System since April 26, 2001, but the IMF has been withholding $300 million in concessional finance since 2002, due to the government’s failure to comply with its prescribed structural adjustment package. In 2005 the World Bank cut back its upcoming three-year loan package by one-third, citing lack of transparency and good governance.
Yemen joined the Extractive Industries Transparency Initiative in March 2007.