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As IMF Urges End to Yemen Oil Subsidy, Cites Policies, French Apartment for Sale?

By Matthew Russell Lee

UNITED NATIONS, May 9, updated 6:25 pm -- Yemen Finance Minister Sakr al-Wajeeh has said Yemen is applying for an IMF $200 million loan spread throughout the next three years. On Thursday, Inner City Press asked the IMF to confirm that, and that the IMF is urging an end to Yemen's oil subsidy.

IMF spokesperson Gerry Rice read out part of the question, at the IMF's online biweekly briefing, then referred Inner City Press to the IMF's broader paper on energy subsidies issues a few weeks ago. [And see update below.]

Yemen may be a specific case, however. Already, there are long periods of time without electricity, in a country many in the international community say they are trying to support in a transition to post-Saleh democracy. End oil subsidies now?

A journalist physically at the IMF on Thursday asked about similar demands made in the past on Pakistan, and whether the country is looking for a new program. Rice said no, there is no formal request for a program from Pakistan.

Inner City Press asked Pakistan's Permanent Representative to the UN Masood Khan who concurred, saying how could there be? It's an interim government. For now.

Footnote: Another IMF paper advises at least some countries to sell off their "non financial assets." Yesterday it was reported that France wants to sell off the Park Avenue apartment where its Permanent Representative Gerard Araud lives. Would he keep living there as a tenant? Inquiring minds want to know.

Update: and after 6 pm, the following came in, from an IMF spokeswoman:

Notwithstanding substantial progress in macroeconomic stabilization in 2012, Yemen continues to face serious economic and social challenges. In particular, it is essential to implement reforms that boost inclusive growth in order to reduce unemployment and poverty, while improving the quality of public spending and fiscal sustainability. Generalized subsidies have reached about 9 percent of GDP, eating up two thirds of the budget’s hydrocarbon revenue.

Generalized subsidies benefit the rich disproportionately because the rich consume more energy. Generalized subsidies also lead to inefficiencies and poor governance, and encourage smuggling. At the same time, more efficient direct social protection that is executed through the social welfare fund was about half a percent of GDP, and the much needed capital spending was less than 4 percent of GDP.

It would therefore be beneficial for the poor and the population as a whole to gradually improve the structure of public spending by gradually reducing generalized subsidies and increase efficient social spending and infrastructure investment in order to better target the poor and to increase job creation and growth. This is a generally good policy

(see, but the pace and details of its implementation should take into account the specific circumstances of each country.”

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