Sanaa, Yemen – Protesters took to the streets of the Yemeni capital earlier this week, barricading roads with bricks and burning tyres in response to a government decision to increase the price of fuel by up to 90 percent.
Yemen’s government has planned for months to cut the hefty fuel subsidies it uses to keep the cost of living down, as it struggles to rein in public spending and avert a foreign currency crisis. But the need to balance the books has been tempered by fears over the impact the price increase would have on the neediest people in the Arab world’s poorest country, and by the possibility that it would cause unrest.
“With fuel prices soaring and water supplies rapidly running out, millions of poor Yemenis are struggling to feed their families and access water,” a spokesman for Oxfam, a UK charity that works extensively in Yemen, told Al Jazeera.
“Most Yemenis do not have access to social safety nets to help them endure a crisis like this and are falling through the cracks. With the lifting of the fuel subsidies, it’s more important than ever for donors and the Yemeni government to help build a social protection system and pull Yemen back from the brink.”
Late on July 29, the government sent instructions to state-run fuel distribution facilities that from the following day, a litre of gasoline would be priced at YR200 ($0.93) rather than YR125 ($0.58), while diesel would be sold at YR190 ($0.88), up from YR100 ($0.47). This marked increases of 60 and 90 percent, respectively.
The price hike came as a surprise to many Yemenis – no official announcement was made about the increase, a decision that, according to a government official who spoke to Al Jazeera on condition of anonymity, meant to prevent protesters from planning demonstrations in front of key government buildings.
The army was sent to guard most major financial institutions and fuel stations in the early morning of July 30. At the same time, stations were provided with fresh fuel supplies after months of shortages.
By the early afternoon, however, protesters had set up improvised roadblocks, sending plumes of smoke into the sky across Sanaa. On Nouakchott Street, a major road along the western edge of the capital, a policeman argued with the organisers of one such barrier: “How can we live like this?” one of the men screamed at him.
and screw the government up. The cost of living was too high before, and now it is unliveable.”]
Watching the scene was Ghaleb Saleh, a 47-year-old taxi driver. “It is because of the petrol; they put the prices up,” he said. Grabbing his throat with his thumb and forefinger to signal asphyxiation, he added: “This will kill us. President Hadi, he does not care.”
While the road next to a major government-run fuel station on 60 Meter Road, one of Sanaa’s main thoroughfares, had been logjammed with cars, trucks and buses queuing for fuel for months, the area around the station now sits empty.
Many of those in the queue had gone home upon being informed of the price hike, said Ibrahim, a 22-year-old attendant at the station. Others reacted angrily despite the sudden availability of fuel, he said. “People were surprised and there was shooting all around us,” Ibrahim said. The army unit stationed at the facility had to intervene, he said. Sporadic gunfire could be heard for much of the early afternoon, with similar incidents taking place across the city.
Meanwhile, on one of the hundreds of dabbab minibuses that crisscross Sanaa on a daily basis, customers were surprised to learn that the fare had doubled overnight from YR50 ($0.23) to YR100 ($0.47) for a short journey. “Tomorrow, everyone will get their AKs [Kalashnikovs] and screw the government up,” said Mohammed, a 19-year-old drama student who boarded the bus. “The cost of living was too high before, and now it is unliveable. The price of everything, sugar, cigarettes, will go up.”
A senior official source told Yemen’s news agency, SABA, that the decision to cut the subsidies was taken in order to correct imbalances in public funds so that the government can invest in other development projects and improve social services.
Yemen has run successive record budget deficits since a year of debilitating protests and inter-elite conflict in 2011 left the economy in tatters and the poverty rate above 50 percent.
The government has struggled to stem the flow of attacks on an oil pipeline that provides the country with much of its fuel, forcing the government to import the resource from abroad. It then sells it at a loss to the local market, while haemorrhaging dollars, which it also needs to pay for food imports.
Energy subsidies cost the government more than $3bn in 2013, according to the finance ministry, more than it spent on new infrastructure, healthcare, and education combined.
The drag on the budget made it inevitable that the government would run out of money before the end of the year, the same government official, who spoke to Al Jazeera on condition of anonymity, explained. “The choice has been between waiting for the economy to collapse and not being able to do anything about it or doing something now that will cause short-term pain,” the official said.
The International Monetary Fund has offered Yemen a $560m loan that is conditional on subsidy cuts, while President Abed Rabbo Mansour Hadi is said to have received a $2bn loan from Saudi Arabia, officials from Yeman’s finance ministry told Al Jazeera.
The money has been deposited into Yemen’s central bank. Yet, under the terms of the IMF deal, the government was not expected to begin cutting the subsidy until October, and then to do so gradually.
The speed with which the government has cut the subsidy is likely to send the cost of living spiralling, lending further instability to a country in the midst of a political transition, but most importantly hurting Yemen’s poorest people the most. In 2011, the World Bank estimated that a fuel price hike could lead to an increase in poverty of between two and six percent.
Sources with knowledge of the inner workings of the Social Welfare Fund, the main lifeline for many of the country’s poorest people say that the finance ministry has not authorised welfare payments to the fund since January, and worry that the savings made by the government may not be passed on to Yemen’s neediest people.
“With the lifting of the fuel subsidies, it’s more important than ever for donors and the Yemeni government to help build a social protection system and pull Yemen back from the brink,” Oxfam’s Anderson says.
Even those with regular incomes are likely to struggle. “My friends make around YR1,000 or YR1,500 a day,” said Mohammed, the dabbab passenger.
“Before, half of that was used up covering transport and food for the day. Now, they will end the day with nothing.”