Yemen is one of the poorest and least developed countries in Arabia, with high unemployment, rapid population growth, and political turmoil. Yemen's economy depends heavily on the oil it produces, and its government receives the vast majority of its revenue from oil taxes. But Yemen's oil reserves are expected to be depleted by 2017, with fears of a resulting economic collapse. Yemen does have large proven reserves of natural gas. Yemen's first liquified natural gas (LNG) plant began production in October 2009.
Rampant corruption is a prime obstacle to development in the country, limiting local reinvestments and driving away regional and international capital. The government has recently taken many measures to stamp out corruption, but efforts have been met with only partial success. Foreign investments remain largely concentrated around the nation's hydrocarbon industry.
Substantial Yemeni communities exist in many countries of the world, including Yemen's immediate neighbors on the Arabian peninsula, Indonesia, Pakistan, the Horn of Africa, the United Kingdom, Israel, and the United States, especially in the area around Detroit, Michigan, and in Lackawanna, New York. Beginning in the mid-1950s, the Soviet Union and China provided large-scale assistance. For example, the Chinese are involved with the expansion of the Sana'a International Airport.
In the south, pre-independence economic activity was overwhelmingly concentrated in the port city of Aden. The seaborne transit trade, which the port relied upon, collapsed with the closure of the Suez Canal and Britain's withdrawal from Aden in 1967.
Since unification in 1990, the government has worked to integrate two relatively disparate economic systems. However, severe shocks, including the return in 1990 of approximately 850,000 Yemenis from the Persian Gulf states, a subsequent major reduction of aid flows, and internal political disputes culminating in the 1994 civil war hampered economic growth. As the fastest-growing democracy in the Middle East, Yemen is attempting to climb into the middle human development region through ongoing political and economic reform.
In the late 20th century Sana'a’s population grew exponentially, from roughly 55,000 in 1978 to more than 1 million in the early 21st century. Sana'a may be the first capital city in the world to run out of water.
Since the conclusion of the war, the government entered into agreement with the International Monetary Fund (IMF) to implement a structural adjustment program. Phase one of the IMF program included major financial and monetary reforms, including floating the currency, reducing the budget deficit, and cutting subsidies. Phase two will address structural issues such as civil service reform.
In early 1995, the government of Yemen launched an economic, financial and administrative reform program (EFARP) with the support of the World Bank and the IMF, as well international donors. The First Five-Year Plan (FFYP) for the years 1996 to 2000 was introduced in 1996. The World Bank has focused on public sector management, including civil service reform, budget reform and privatization. In addition, attracting diversified private investment, water management and poverty-oriented social sector improvements has been made a priority for the implementation of the programs in Yemen. These programs had a positive impact on Yemen’s economy and led to the reduction of the budget deficit to less than 3% of gross domestic product (GDP) during the period 1995-99 and the correction of macro-financial imbalances.
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