By Fuad Rajeh
SANAA, Jan. 25 (Xinhua) -- Yemen is still struggling to recover its economy a year after it started to implement a West-backed political transition deal in the wake of an unrest that deepened the country's woes, officials said.
Suleiman al-Qutabery, assistant deputy minister of planning and international cooperation for development projects, said Yemen is facing a slow or stalling economic recovery due to problems including the tardiness of donors to deliver their aid pledges.
"Discussions between the government and donors on how to allocate and channel the aid are continuing, with the issue of establishing good mechanisms to absorb aid set as a priority at the moment," he said.
According to studies by international agencies including donors, Yemen's economy grew by 0.1 percent in 2012 compared to the 2010 figure, but the foreign debt remained at 18 percent of the GDP. In 2011, because of the unrest, the country's economy shrank by 10 percent.
The studies expected Yemen to face more problems this year including an increase in the domestic debt to 31 percent of the GDP, from 26 percent last year, and an increase in the budget deficit to 6 percent of GDP.
The government prepared and approved with the donors last year the Transitional Program for Stabilization and Development 2012- 2014 which remains the reference to recover the economy, according to Al-Qutabery.
"We are implementing this program despite fund shortages caused by delayed aid from donors," he added.
The donors and friends of Yemen held two meetings in Saudi Arabia and the United States last year and pledged about 8 billion U.S. dollars in aid to Yemen during the transitional period. But key donors hesitated to accelerate the release of their pledges for reasons including fears of the government's inability to absorb aid.
Officials and observers said among the reasons was also the security situation. A senior official at the planning and international cooperation ministry said most donors link the release of aid to improving security situation.
"Security is one of the key factors for accelerating aid. I think donors are right because no projects can be implemented in unsafe areas," the official explained.
According to the Transition Program, the government is supposed to control the budget deficit and inflation rates, boost confidence in the national currency and conduct robust fiscal reforms, with a special focus on improving the investment climate.
In addition, priority will be given to labor-intensive projects in a bid to reduce unemployment especially among young people, expanding education enrolment, fighting corruption and improving transparency and supervision mechanisms.
Observers said that despite the ambitious program, the government could not meet the minimum economic recovery and development requirements in it.
Marzouk Abdulwadoud, head of the economic and social development researches center "ESDR," said the government should understand that economic indicators are still bad even after launching this program.
Besides pinning hopes on foreign aid, Yemen also is seeking to strengthen its economic relations with foreign countries including China, which has become the country's top trade partner.
Eqbal Yasin, first deputy minister of industry and trade, said Yemen has well-prepared strategies to forge its economic links with other countries, mainly rich neighbors such as Saudi Arabia as well as China.
"Through bilateral committees with each country and free trade zone including the Arab free trade zone, Yemen will build stronger links with other countries," he said, adding donor countries understand Yemen's need for help on this issue.
On China, Yasin said Yemen looks forward to bettering economic links with the Asian giant which has become its top trade partner.
Yemen hopes to increase Chinese investments in the oil and gas sector at the Aden free zone as well as other areas, he said.
"China has liquidity and experience, which means Chinese investments can help Yemen during this period very much," he said.