International Bank for Reconstruction and Development        86325
                  International Development Association
                     International Finance Corporation
                Multilateral Investment Guarantee Agency
                         FOR OFFICIAL USE ONLY
                         CONFIDENTIAL
                                                                       EDS97-395
                                                                  November 3, 1997


Board Meeting of Tuesday, November 4, 1997
Statement by Godfrey Gaoseb
        Yemen :   Country Assistance Strategy - Progress Report

     We welcome the opportunity to discuss this progress report on the
country assistance strategy for the Republic of Yemen and commend the
Yemen authorities for their achievements on the economic front in the
last two years. The successful implementation of the first phase of
the stabilization and structural reforms has led to a stable exchange
rate, a drop in the     inflation rate and a decline in     the fiscal
deficit.    In addition, the balance of payments position is now
stronger and the external debt situation has improved considerably.
The collaboration between the Bank and Fund in assisting the Yemeni
government to implement this strong economic program successfully is
also commendable. We hope that the two institutions will continue to
collaborate with each other and with other development partners in
Yemen.
     We also observe that    portfolio management has improved,  with
only a few projects rated as unsatisfactory, while problems relating
to procurement, audit reports,     and counterpart funding have been
resolved. The strengthening of the Resident Mission in Sana’a has, no
doubt, contributed to this improvement in portfolio management.
     The government of Yemen has also made significant progress in the
areas of trade policy reform, privatization and investment, resulting
in the restructuring and privatization of a number of public
enterprises, introducing a new tariff and a new investment code.    In
view of the progress made so far, we have no difficulty in supporting
the Bank’s continued assistance to     Yemen in order to sustain the
economic reform program and complete the unfinished reform agenda. The
broad objectives of the Bank’s assistance to Yemen:- accelerating and
sustaining non-oil sector growth, reducing unemployment, improving the
country’s social indicators, strengthening the social safety net, and
continued financial stability are, in our view, very appropriate.
     In contrast to these encouraging achievements, however, we
observe that education and health indicators in Yemen remain weak. The
government’s determination to increase budgetary allocation to these
important sectors is quite evident and we encourage the Bank to play
a proactive role in these areas.    This is very crucial for helping
Yemen to reduce the level
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of poverty.   Strengthening the  social safety nets also needs to be
given particular attention. We     wonder why no new operations are
included in FY98 for these sectors. We strongly support the Bank’s
strategy for Yemen for addressing the        institutional    capacity
weakness in the country to enable the government to deliver its social
programs. We would appreciate staff elaboration on the progress made
so far in capacity building in Yemen.
     In conclusion, we endorse the proposed IBRD/IDA lending program
for the next three years and support the two credits accompanying this
progress report.