REFILE-Yemen govt curbs travel, recruitment in austerity drive

Thu Jul 10, 2014 8:22am EDT

(Refiles to fix garble in 11th paragraph)

* Govt to assess viability of state-owned companies

* Public sector recruitment frozen

* Special military unit to tackle tax evasion

* Oil drilling costs to be reviewed

* New diesel power plants, upgrades banned

By Martin Dokoupil

DUBAI, July 10 (Reuters) - Yemen's president has ordered a raft of austerity steps, including a review of state-owned companies' viability and curbs on foreign travel by government officials, to ease pressure on the impoverished state's crumbling public finances.

Sanaa has struggled to pay public sector salaries and finance food and energy imports, which has led to power cuts and fuel shortages as a fight against al Qaeda militants and other rebel groups undermines the state budget.

In a statement late on Wednesday, the government described President Abd-Rabbu Mansour Hadi's belt-tightening package as urgent.

Among the measures, recruitment has been frozen for all state institutions and procurement of cars has been halted. International travel for senior officials will be restricted, along with the renting of new offices and expense claims.

"Government officials, including ministers, are to be limited to a maximum of four overseas trips a year. The maximum duration of stay during official travel should not exceed five days," the statement said.

"State officials are no longer permitted to travel first or business class," it added.

The government did not say how much money it expected to save with the austerity drive, or elaborate on how it would conduct its review of state firms' economic viability and when the results might be seen.

Hadi has been trying to stabilise the country for over two years, after political and economic turmoil forced his predecessor to step down. But the state's push against Islamic militants and rebels has sparked attacks on crude oil pipelines that are key to obtaining up to 70 percent of state revenues.

Sanaa earned just $671 million from exporting crude oil in January-May, nearly 40 percent less than in the same period last year. The central bank's foreign asset reserves have shrunk to $4.6 billion, the lowest level since end-2011.

The government's statement said it would create a specialised military unit from its special forces to help combat tax and customs evasion in a country that is awash with weapons.

"Overlapping agencies currently present at custom inspection centres will be eliminated and custom valuations and tariffs will be reformed," the statement said. At the same time, the finance ministry is to review the tax collection process and resolve tax debts.

The government did not announce any fresh measures directly aimed at reducing widespread corruption, which is a major drain on state funds.

ENERGY SECTOR

The second-poorest Arab nation after Mauritania is hoping to secure a long-discussed loan from the International Monetary Fund that could help unlock more donor funds, which have been held back by fears of corruption and a lack of progress in economic reforms.

Yemen's finance minister told Reuters in May that the country was seeking "substantially more" than the $560 million which the IMF proposed, and that the Fund's board was expected to finalise the deal in July.

The IMF has pressed Yemen to cut the energy subsidies which cost it $3.07 billion last year, equivalent to 30 percent of state revenue and 21 percent of expenditure.

However, reducing subsidies is hard in a country where a third of the population of 25 million lives on less than $2 a day, and this week's austerity package did not address subsidies.

Instead, it said the government would review the cost of drilling and extracting crude oil to bring it down to global averages, while the ministries of defence and interior would work to resolve security problems at production sites.

The president also banned the state-owned Public Electricity Corp, which operates most of Yemen's power generating capacity and the national grid, from building new diesel power plants, leasing them or financing expansion of current ones. The PEC is to review contracts and seek to lower the cost of purchasing power for the grid.

"The government must work on expanding gas and coal powered plants to replace diesel plants. Plans to install and operate Mareb's Second Gas Powered Station by the end of January 2015 will be expedited," the statement said.

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