NATIONAL INTELLIGENCE SURVEY 32B; SOUTHERN YEMEN (ADEN); THE ECONOMY

• Document Type: CREST
• Collection: NIS
• Document Number (FOIA) /ESDN (CREST): CIA-RDP01-00707R000200100020-3
• Release Decision: RIF
• Original Classification: U
• Document Page Count: 24
• Document Creation Date: October 25, 2016
• Sequence Number: 20
• Content Type: REPORTS

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stantially completed by March 1973.
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Page
2. Development 12
3. Manpower 12
D. International economic relations 13
1. Foreign trade 13
2. Balance of payments 14
3. Foreign aid 16
Glossary 18
FIGURES
Page
4. Manufiefuring and construction
8
a. Nlanufachuing
8
b. Cotutmction
8
a. 11nnestic trade
9
C. Eeonomie policy and development
9
L policy
9
a. 1l':iblic finance
10
b. Monetary and banking institutions
11
c. Monetary policy
11
Page
2. Development 12
3. Manpower 12
D. International economic relations 13
1. Foreign trade 13
2. Balance of payments 14
3. Foreign aid 16
Glossary 18
FIGURES
B
Page
Fig, 1
Land use and economic activity
(map)
2
Fig. 2
Principal crops chart)
4
Fig, 3
Fish prodnction, exports, and imports
13
Fig. 10
(chart)
15
Fig. 4
British Petroleum refinery photos)
7
Fig. 5
Petrolchun refining (table)
8
F1 q, 6
Major manufacturing output chart)
9
Fig.
Government budget table)
l 1
B
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Page
Fig. 3
Three War Development Plan
(chart)
12
Fig. 9
Commodity exports and reexports
(table)
13
Fig. 10
Imports by commodity table)
15
Fig. 11
Estimated retained imports table)
15
Fig. 12
Direction of trade chart)
16
Fig. 13
Balance of payments table)
1;
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The Economy
A. Economic appraisal (U
1'enn�n :%Ic1l)�I Ill- III- ople i1�Inl/lit
of 1'etnell IVI). It. V �is oue of the 111110 Iackaatcf
stal(�s in 11114. Middle F.rl. Its Laid an-if of III.IMtII
sepl:ue rnih�s voll%is11s rtlainl% of inho.pitahlr t4.ttain
:Ind is poor in mineral n oortv,. The c,o tltn clinlat4.
is oppr4.ssive mid :Ind. and tnlrl ill its I.a million
I>,�ople are unskilled and illiterate.
The Iocatioll of the poll of \den nlar Ihv tmttth lot
the lied Sea made it a tenter of international trade for
centuries. It is ill(- eapit ll :In(I largt,st cil% in Ih
comilry. Its veonoim- litmv%er. i% if-. snddenl
disrupted in IW I)%- tiro major e%etlts �the closiii 'f
the Suez Canal as a result of the Arab- Israeli %%ar. and
the ,nutting of indep>,�ndent h% the failed Kingdom.
Former trade routes through the Suez (::u1al %c4.n�
abandoned. anti shipping through Aden fell
precipitously. %%'ith indepelidence. U.K. fill and
military expetl(Iitif res were cut back, further
undermining th(� ec�ononly.
The P.111I.Y.'s economic life is divided sharply
between the urban and nlral communities. Since
indePend4.tice, mane foreign residents have Ieft Aden.
and mane 1'etnenis have whittled to the hinterland.
Nonetheless, Aden remains the cetter of economic
activity, hased on its domination of the sur%
foreign trade and on its role as the commercial huh of
the surrounding countryside. The Waal economy
consists largely of subsistence farming by peasants and
grazing by noinadic tribesmen. Cotton is grown for
export in small areas in the southwestern plains near
the coast.
With the diminution (if its once flourishing trade
sector, Yernen (Aden) depends to an increasing extent
on agricti4tire and if small manufacturing sector for
I'C1 lilt 1 Ill IC t: rlrH i f gollf I 1 1o. Con 1�ttlrlN�rll
r1tntn.Inds fuu tl"rrw" Alilll to 1afr% Iml its
Iraic desr Infrnu nt plan to 4 1011%ett Ov t.omll., frhrtn a
�4.4.11,111~�- 1 +tienllyl to a ptllnctinn -orir nl1�tl eernon
fh4. 4.I.In� ion of avicnitclw i� liniled b% lilt. �car0h
of :Ir:lhll� land :Ind of Tll sell
snfficient in au+ of Its low-ic IONA relluin nu nts. and
t roll iehls Illtc�trl.lh� %%ills %ariati ill
rainfall. Political instabilil%. all unskilled labl-r force.
.Intl an unfa%orallle imestuu�nt climate f1 +r fomigil
enttelrrlItelm limit the chance, of (11.%0oping net%
mdu.tric.. The British 1'etroleunl Conlpan% Ilil') oil
refiner% ill Aden. "Ilich pnlcesses inlporh�d erode�
accomils for nearly thr:�t�-fonrths of the %flue of
industrial output.
The present t;merllttent of 1'enu�n (Aden). headed
b the National Front. %obscribes if) the general
concept% of ;1rab natiorta ailti- impelialisn. olld
socialism. Most indilstries ham- been nationalized. as
";is residential and t�oinnu�rc�ial prnpert% in the
sumnn�r of 1972. ;1s a result� the flight of business and
of capital has been considerable. In keeping Frith its
,\Iar\isl orientation. the P.I).R.1'. receives most of its
military and ec�otlotnic� assistance from the U.S.S.11.
and other Communist countries.
One factor in the failure to stabilize the economy
has been the guerrilla warfare that has persisted since
independence along the borders with Oman. Saudi
Arabia. and Yrnu�n (San'a').' In November 1972,
under pressure row other Arab states, the two 1'enu�ns
officially agreed to unite, but opposition from tribal
and dissident groups ill both countries, as well as
ideological differences with the more moderate Yellwn
Tor Oiacritics on place manes see lilt- list (if names on lilt- apron
of the Summary tap in the Country Profile chapter. the map itself.
and the map in this text.
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Land Use and Economic Activity
M Oasis J Nomadic herdvin
Additional cultivated Sand desert
land
QCotton ll Tobacco b Olive oil processing
Grams A Petroleum refining 44X Fish processing
Fruits Cotton factory a Shipbuilding and repair
YK
o r
11 M.kall3
AEAt
Aden
501759 5.77
(San'a') government, will make achievement of unity
difficult at hest. The economics of the two countries
arc not complementary; the principal economic
advantages of the merger would appear to he the
.;aving of funds now spent on border warfare and the
improved prospects for increased foreign assistance if
peace prevails.
B. Structure of the economy
'rhe economy of the P.D.R.Y. is based largely on
entrepot trade and on financial, hunkering, and other
services offered at the port of Aden. Together these
activities contributed about a third of the estimated
$160 million gross national product (GNP) a 1972.
Although they contributed a smaller share of GNP
before independence (about 25% in 1966), the GNP at
that time was almost double what it is now, and Li. K.
military spending made up a large part of it.
Production in Yemen (Aden) centers around small
scale agriculture, fishing, and oil refining; combined,
these activities accounted for about one third of the
1972 GNP. Local government expenditures made up
about a fifth of GNP, and most of the remainder was
accounted for by construction and transportation. Onc
of the major goals of the Threc Year Development
2
FIGURE 1. Land use and economic
activity (U /OU)
Plan 0-172 -74)" is the gradual transformation of the
economy from one h:.tsed on services to one based on
production. (C)
1. Agriculture, fisheries, and forestry (U /OU)
a. Agriculture
Agriculture is severely limited by rugged terrain and
meager water resources. The terrain consists of a
dissected n arrow coastal plain, steep hills, rugged
mountains, and an extensive interior desert plain. Less
than half of the 500,000 acres of arable land is
cultivated, the amount varying with the annual
rainfall. Of the cultivated land, 80% is irrigated by
simple impoundment devices and most of the
remainder by wells. Under drought conditions. such as
those that prevailed in the 1969/70 crop year, the area
of cultivated land drops to as little as 150,000 acres,
and crop output suffers accordingly. (Moreover,
agrarian reform legislation and the expropriation of
some land have set back farm production. Yemen
(Aden) is not self sufficient in any of its basic foods;
the country often imports more than 50% of its grain
requirements.
l'he fiscal year extends I April through 31 \lurch and is
designated by the year in which it concludes.
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,lgrariau 1-411"rrt1 Isla. ill Ims a14d I!);(1 limilfwl Ile/�
size of Itti%all.1 oared :14�tvage hr a leltal of Ill ill-tO�4
per falnth is irtigilled land :fill X11 aches 11 1t
tonifigale41 1:11141. The� hlrival Estill 14 ill tl/atl :d
WPM i.about .i at-ti". A111cuah a fctt, LI111. at4"
larger.` In the hill% ara%. fatm.aitet :lee I let I 1 Z :rett`*.
Before the� :l9tilrian 0.1414144.. Icua141 Lltnlin� a:l�
colntnon ill the coa.t:l: egic11', ahetf-a. 11141+1 of the
farms in the interior higldands were aotk4-d If% thf-it
owners.
Under the 1966 refnrrn Isla, land ill 411
prescribed eeilungs was seeluestered he Ili. .late ftll,fi
private holdin,,s. front latid held in n�ligion. trust 01141-
u:uIj land). awl front lilt- holding% of fortlrt,ulla18%
and amirs. In IWO. thi! land was made available to
farmers through cooperative., while eraner.hip
remained with the state. An estimated 650N) acre~
were (list ributed to about 190N) families. In addition.
12 state farms were� organized on public land. The
government set up la agricultural cooperatives to
distribute seeds and fertilizers. provide farm
niachinery, and drill wells. The cooperatives ha%e
been extended loans through the Yemen Natiotlal
Bank, amonnting to about YD0.5 million (nugltl%
USSI. million) since its establishment in :April 1970.
Wost farmers follow age -old practices �with little
mechanization. little or no rotation of crops. and a
Ininimuln use of fertilizers. Only a small portion of
cultivated land is double cropped. generally thine
acres irrigated from underground water. The
government has taken measures to stabilize
agricultura'. output. One of the objectives of the Threv
Year Development Plan is to increase agricultural
production by about ZOfr mainly by drilling wells,
constructing canals, and expanding existing irrigation
systems. The traditional form of irrig consists in
the control and use of the rain and stream water that
occasionally floods some of the valleys earth banks
are constructed to divert the water to the fields.
Under the development plan. 85 new wells. have
been drilled. A bilateral agreement with the U.S.S.R.
provides for 20 more wells to he drilled and 8 flood
control clams to be constructed, .3 of which are to bo
complete by 1974. A nationwide agricultural survey
is underway, sponsored by the Kuwait Fund for Arab
Economic Develol (I:FAED). The United
Nations Developy-n' 1I. Pr(.g am (UNDP) is sponsoring
an agricultural and hydrological survey of the Tuban
valley. Bilateral agreements have been concluded with
the U.S.S.R., East Germany, and the Peoples
"Before the enactment of the agrarian reform laws. some coastal
farms were over 1,000 acres in size.
lIvIvIllflil of ('Gina lot line 4111 rlt owlN1r1 111 At fit 11,41
elot l4144" ill tot :d art -A' :01141 live 111 At
40tierlllfit,4l wwatch tl,4lioll
1 I Ataftot rttrltt- 111� 11t40vt covVI" ,4ro 4+id11
Iteal. Ifatle '.rtvlltrttt :01141 I1towt tltinMt_ m"I ,111cliot Vol clollolr 'Isidek l hrttl
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ill Ihf- tltelllglll %S�.It f!Mi ;11 4%:1% :liwo111
totllparvil ailll .INI11111� Ihr pn4lylin� e,4t (lnlprl!
1161� rVIIIA111Y1 at IIw I�/aer Imwl 6 Vol 411111imlifft
:uh f-nt- aea1111-t mill 11� Inlcli/rtr Ill Ism$ 111I10- t-rlrlf fife
pe.h. Gmt�rlltltetrt 1-111101. In i14rteaw /11111011 %irhf. I" t
acre tictolngL Ihf- f-%p.Ind1�e1 ww of fef iliier� .11111 Ill 41
control 11:1%4. 11411 111-4.11 1. htwhmtiou 1�
managed he gf%4�tnfiletlt 114tioll�. .14141
sincv Fvlrelan 1972 tiff- n�.Io +tf�ihilitt for nlatkumist
Mid export of vollonr h.I.- 1141-14 cf .11-41 in a t11111fitills I. ill
the Niillisln of .%grie�ellterrf- .11441 :%gr.1liall 1i1-11rtIll
Fanner. are paid a guatatlrf-d privv fiwfl at Ilie
beginning of rash welmIl1 1 rr.Ili"/.t1 11% 1If,
boards After taw mid olhf-r f-ytf 1411�� .Ire rf�lurnayl its
farmer% in tiff- font 411 dkidf-td�: to -.f a f- Irlrnl/� Is%
the government boards.
Annual pnduetion of graftls. hea%ik df�ln�14d1-n1 tot
rainf all, dropped to alnut ;2.(X" sort� In I!Nl!) ;11.1141
1910! 1 front a high of -Vi.(NN) ton� in IWS fi!). (:rain
prodnc�tion c�urrentic mvvI% Iv Ill:m :111 of tlonn��tie
rnlluirenn'nh.
Yemen (Aden protblc v, afoul I(N1.(NN1 [fill�
annually of fruit and yegelables. mainly d.tv
bananas, tomatoes. nnt-lot.. If.Iwpaa.. Ie1111m. .11141
cabbage. Dates, the most in4lortant. ary groan
primarily in Wadi ILidltranlafit it tilt- Fifth
Governorate. Although the output of some fronts .Ind
vegetables exceeds local refli irement.. v\IIlrt is
hindered by inadeeluate markeling faeiliti and Istw!
roads in the interior.
Production of tobacco, which is grown on :I .mall
scale in the Fifth Governorate near Al Nlukalla.
averaged 1.300 tons it year in the late 1960'.. The
importance� of tobacco as it cash crop will he enhan ed
with the building of it cigarette manufac ring pl :Inn
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its 1 ,1 971 X71 hulls, +11 ".+a *0.111) Ill lot 111 Irr.l +llrt
APPROVED FOR RELEASE: 2009/06/16: CIA- RDP01- 00707R000200100020 -3
I%$ M N 09 70

c. Forestry
There are no forests in Yemen. The natural
vegetation, consisting of scrub bushes, scattered trees,
and a neager amount of tough grass, serves primarily
for animal forage.
2. Fuels and power (C)
a. Fuels
Yenen has no commercially exploitable deposits of
liquid or solid fuels. \lost rural communities use
animal dung as the prima-y fuel. Exploration for oil
lilts been conducted by both U.S. and Algerian
companies, but no exploitable deposits have been
found. Petroleum is imported for the British Petroleum
Company refinery at Aden, and all but .:bout 100,000
tons of the annual output of the refinery is exported.
The 13P refinery (Figure -1) accounts for 73% of the
yaluc of industrial output. The Yemen (Aden)
government receives refining; fees, income taxes, and
rental fees, as well as indirect benefits from the wages
and salaries and other business generated by the
refinery operations. BP has agreed to it minimum
annual payment to the government of US$1.6 million.
Payments by the refinery directly to the government in
1971 totaled S -1.4 million; total local cash outlav to the
)'amen (Aden) economy equaled $12 million.
The BP refinery, %yhich has an a!snual capacity of
8.9 million tons, processes crude oil from Iran, Kuwait,
Iraq, Qatar, and the United Arab Emirates (U.A.E.).
Products include fuel oil, kerosene, gasoline, and
butane. In 1971, major maintenance and overhaul
required a slash in output of 50%, to about 3 million
tons (Figure 5). All but 7% of the output is exported.
Major markets are the United Kingdom, Japan,
Australia, South Africa, and 'Thailand.
Aden's flourishing bunker trade,, one of the largest
outlets for refinery production, dropped drastically
after the Suez Canal was closed. Before June _19117
about 2.8 million long tons of the refinery's output
and 1 million to 1.5 million long tons of imported fuels
were sold as ships' fuel at Aden's bunkering facilities.
Ship arrivals fell from about 500 to about 50 per
month between 1966 and 1968; and the hunker fuel
sold Fell from an estimated :3,600,1100 long tons in the
former year to 430,000 in the latter. The amount has
increased only slightly since that time.
Distribution of refined oil products in the country
was taken over from foreign companies by the Yemen
National Oil Company (YNOC), established under
the government's Petroleum Board in 1969. The
YNOC has opened several new stations to sell oil
products and has expanded marketing operations
I t
throughout the country. In FY71 the company
imported 1. 10,000 tons of refined and other oil
products valued at US$ -I milliot. I)onestie sales in the
sane year amounted to about $9.6 million.
The Petroleum Board represents the government in
the joint Yemen- Algerian Pclrolc(nt Company
(YAPCO), established in 1965 with the Algerian
National Oil Company (SONATRACIi) to carry out
oil exploration in Yemen (Aden). YAPCO began a
seismic survey in late 1970, but by mid -1972 had not
started deeji drilling. The major part of the cast of
exploration, estimated at $10.4 million, \gill be borne
by SONATIIACII.
b. Electric poever
The principal consumers of electric power in the
are the petroleum rcfincrv, the city of Aden,
and it fc\v smaller urban areas. At the end of 1971,
estimated installed capacity was about 128,000
kilowatts (kw.), of which more than thrcc- fourths was
in or near Aden. Production dtii,ug the year was aboti"
378 million kilowatt hours (k\y. -hr.), less than 40" J
capacity. Per capita production was 250 kw. -hr.
Control of Yemen's electric power industry is split
among the Aden Electric Company (AEC), the
Ministry of Public Works and Communications, and
British Petroleum ,(131 The AEC is responsible for
government owned electric facilities. \yhiciv include
tAe largest installation in the cot: try �the 56,180 -kw.
lilt's 1 powerplant.
All electricity in Yemen is generated by thermal
powerplants, using oil and gas from the BI' refinery. In
addition to the lilt's Iledjuff pmverplant, important
facilities include the 22,500 kw. 131) refinery
powerplant and all aggregate of 2:5,000 kw. in
powerplants formerly owned by the British armed
forces. The Ministry of Public Works and Coln-
ill till ications bas a number of generating plants, the
two most ir�portant being the 13,200 -kw. Khormaksar
and the 6,.20 -k\y. At Tawahi pmyerplants. A 2,400
kw. plant supplies local needs at Al Niukalla: feria
Island has it 2 -kw. po\yerplant; and smaller plants
of less than 300 kw. are scattered in a number of
locations outside Aden.
Transmission and distribution networks are small;
and 6.6 kilovolt (kv.) lines �both overhead and
underground �lead from individual powerplants to
nearby distribution points. Consumer current is 1 and
3 phase, 50 cycles, at 220 volts.
:3. Metals and minerals (U /OU)
Comprehensive studies underway have revealed no
expl0ilablc mineral resources in Yemen (Aden) except
APPROVED FOR RELEASE: 2009/06/16: CIA- RDP01- 00707R000200100020 -3

ML 41W
y r sue"
P.
Refinery area, with tank forms on the left.
Jim
t_
M
Crude oil is piped to the refinery from
adjacent tanker unloading facilities
Distillation unit at the refinery'
4 a�
ti 'iv
IrtriiY:
8
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r
FIGURE 4. The British Petroleum
refinery at Aden, which had been
in operation since 1954 (U /OU)

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APPROVED FOR RELEASE: 2009/06/16: CIA- RDP01- 00707R000200100020 -3

Units
1,400
cctl Soft drinks
1,200 (million bottles)
Dairy products
ou
(thsand litres)
Aluminum ware,
(thousand pounds)
Cement blocks
(thousand pieces)
1,000 Tiles
thousond pieces)
R.0 Shipbuilding 8,
repair (number of st
600
400
eon f F
1967 1968 1969 1970 1970 1971
First
Nine Months
FIGURE 6. Major manufacturing output in the First
Governorate (Aden), whFre the country's economic
activity is concentrated (U /OU)
111kalla, the provincial capital of the I ifth
Governorate, is to Ite completed by 1976; its cost of
a
about 531 million will 110 fiu"ulcCd by it long -term loan
front China.
5. Domestic trade (U /OU)
Aden has for centuries been a famous international
trading center and tinder British rule provided modern
international commercial services as a leading free
port area. 'I'lle countrv's outl areas, on the other
hand, still follow the age -old traditions of the village
marketplace. Since independence, Aden has
c�ctntinued to be file country's major trading center,
althocl;h diminishing in importance as an interna-
tional port.
In Aden. the Central Wholesale Nlarket regulates
the sale of nearly all agricultural products. Farin
produce is brought in d,1ily front tilt� area around
(1cu. Such (rule Kati been reduced since ilclep011d-
ene0 I >y the departure of h:urupean c�uslomers and the
decline in sllips' trade. I adclitio,, to the Central
"Vholesale N-larket, Aden bas rtunu rous specialty
Shops offering European clotbing and other luxury
goods as well as simple household goods, vardgoods,
and groceries.
Tlly governttteilt has increased its controls over
domestic trade, and registration of both personal and
financial data by brtsin0ssmetl is now required by law.
Ili 1970 the National Company for Home 'Prude was
established to act as the sole importer of nwtor
velticics, of goods required b the government, and ()I' certain other items. including pharnutceuticals, soup,
powdered milk, butter, builcliug materials, and
agricultural fit: -hinery� At the sane' time the
government set up the Natiomtl Company for I
Trade to 11,11 the importation cif a ntimber of
consumer goods. .inc�luding sugar, tea. cigarettes,
w11frat. and rir e. Witilin the Ministry of' f couonly and
Industry, the Department of Ilona "Trade administers
prices on all essential imported and locally produced
consumer goods at the wholesale and retail levels.
Profit markups for \yholesalers and retailers are
presently set at Wi lit (iii and IUS-, respectively.
Because of higher international prices 111(1 higher
freight rates� the national trading conipulic's and the
%0iolesale nntrkct have had to alw)rb some cost
increases in order to prevent consumer prices from
increasing further.
In villages and outlying urban centers such us Al
vlukalla, business a1d social exchanges are carried out
in the sugs, dative shopping centers. Barter
transactions are co:uTton and dominate: trade in the
hinterland. The rural economy probabl has reverted
(yen further to barter trade after the loss of' British
support paynlellts to the local rulers.
C. Economic policy and development
(U /OU)
o
1. Poliev
Begier:ing in late 1969, the government look steps
to organize the ceolonly along socialist lines. Many of
the corttrtry's businesses were nationalized and
cooperatives were set up, partk- ularly in agriculture
and fishing. The law effecting nationalizaticnt guyc to
the public sector the primary leadership role in
building up the economy's productk cjlp lcit The
Economic� Organization for the Public Sector was
established to control the Public sector institutions
operating mitionaliz0d businesses.
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Nationalized concerns include the National flank of
1`enlen, the Yemen National Oil Company, the
National Insurance and Beinsurauce Company, the
National Shipping i:mipany, auld the National
Dockyard Company. The National Company for
Foreign Trade handles the export business of all
Nationali conipa[lies.
a. Public ,finance
The national budget provides for the central
government .and for each of the governorates, except
the Fifth Governorate which has its oyn hndget. The
public enterprises- 1'rnleu I ort Corporation. Public
Corporation for the Development of Fish Wealth,
Aden Electric Company, Aden Public Corporation for
,Pater, Public Corporation for Salt, and Public
Corporation for Cenurnl� have separate budgets,
deriving revenues mainly from leyics and commercial
activities. The nationalized companies are budgeted
in the separate budget of the Economic Organization
of the Public Sector. The separate budgets of the 15
cities and towns considered municipalities, whose
revenues collie front local taxes and funds transferred
from the national budget, are small and of little
importance.
The national budget covers current transactions and
Some caliital an(l dcy*.lopnlemt expe nditures' financed
from current revenues. Since independence, only small
amounts of current revenue have been used for
development expenditures. Development projects
financed by foreign aid under bilateral agreements are
not reflected in the budgetary accounts, except for
receipts from the sales of commodity aid.
The national hn(iget is ineffective as an instrument
of fiscal Policy. Since the decline in external receipts
beginning, in 1968, the budget has been drawn up it)
two stages, monthly and yearly. allocations
are based on anticipated curre'il revcnu'e collections
and actual expenditures in tf�: prev ious fiscal year.
The annual budget is not formulated until the actual
results are iN for the first 9 months of the fiscal year
which ends -)I N/larch.
The Fifth Governorate prepares its annual 1)'Ulget
well before the hegtnnnlg of the fiscal year. Before
December 197 the Fifth Governorate, which
includes part of the Hadhr niatlt and has a large
Bedouin population, maintained its own c�ustollis
system, collecting duties on imports (except foodstuffs)
from the rest of the country. Stich duties comprised
about 60% of the revenue of the governorate. In
'The distinction bets%ren capital and (1-Tlopnumt expenditures
is one of ainoijiit: those in excess of YDI2.000 (about U`iSS.1
million) are classified us cicvclopnu'nt expenditures.
10
I
December 1970, the introduction of' the general
import tariff removed c�uslonls barriers between the
Fifth Governorate and the rest of the c�otintry. 'I'll(-
budget of this govenulrate., however, remains separate,
although it is now subsidized from the national
budget.
Domestic revenues of the national government
covered only about 10 of' total expenditures before
1968, the remainder being covered largely b British
budget support payments. Since that till,*., donn*.stic
revenues have peen increased by i(l(litiorl li jjlxes and
the introduction of' a Belly al import t ariff. Bevenu*.s
now cover over 759i of total buelge ted expenditures,
with the remainder coaling from foreign aid an(I
government assets (Figure 7).
Indirect taxes, primarily import duties and excise
taxes, have bcconle the largest source of government
revenues, acc ounting for about 10 1 /1 of the total.
Direct tax*.s consist mainly of taxes on business
inconu' and on wages and salaries. Alt;u)ilgh these tax
rates were raised in 1969, the substantial increase in
revenues realized in Fl i0 feli in C.l'i 1 because
nationalization measures resulted in a drrop in business
incomes and in Wages. Import duties alone accounted
for 28% of the total revenue in FYI 1, the ,car
follMying the introduction of the general tariff.
Nontax revenues include receipts fro(ll the sale of
government properties, profits of the Yen,en Currency
:li(lthority. departmental revenues. and lliiscellaneoI
receipts.
Government expenditures ill r'Y69 were cut by a
third from the FY68 level when British budget support
was discontinued; development .xpenditures were
slashed 855, while current expenditures dropped
about 25r/C. MoreAliao half of the cutback was in
defense and security expenditures, but outlays for
health. educallioll, public works. communications, and
pensions also declined noticeably. In Fl i 1
e�xpendii Tres were increased to cover costs of expanded
government administration and ,;reatcr expenditures
oti education and social seryicos. Capital and
(leyclopnu'nt expenditures finan front the current
budget average about 10Kr of the pre 19178 level and
are confined to minor projects and ll,ai ,tenamce.
The treasury is responsible for executing the
national budget and managing tit(- cash resources of
the public sector. To finance government operations.
the treasury is authorized to use not only hndget
revenue but also holdings on account of the post
office savings fun(l, the Pel:sion fend, and other funds.
The treasury also may draw on advances from the
Currency Authority. Such advances. together with the
authority's holdings of securities issued or guaranteed
APPROVED FOR RELEASE: 2009/06/16: CIA- RDP01- 00707R000200100020 -3

FIGURE Government budget (U /OU)
(Millions of U.S. dollars)
Dofne%tie revenue:
Direct taxes
Indirect taxes
Other
Fifth Governorate
Total
Expenditutes:
Current...........
Capital and developnreni'
Fifth G overnorate
Total
surplus or deficit I
External financing:
Foreign aid:
United Kingdom
Other
Settlement with Fast Africa Currenev Iloatil
Total
Surplus or defiril requiring dnmr. tic financing :3 1
Domrstic financing:
Changr.4 in government defr.sits. net inrtf -a.�r
Changes in government fotrign avets inctrase
Total
Discrepaney 1.1 lit
na Data not avails ble.
�Exclufles development rxpenditut" financrd be fotriitn A
by the gove1111n��111. It: not rured 1'07) 111illifrtl
!I'S$13 nii ioll) or :33 Of Ills- a\rraer 4149rtu�.
revenue thr prv%ioii% .1 \41ac�. Uhirhl�\rr i�
}treater.
b. Monetary and banking inalifulitrnit
The Yenleli Cliftrncy A11111fr114 i.�uf�. the Yrltl��t�i
dinar.' manage% r\trr11al fl-4 -M M. .11141 11nInsI4,
monetary %tabilil% and it .(1111tH fin.ulri.l) .11,41 t�rlyhl
structure ill the cotow '11141 .udh1rih 11.1� lianh,l
sllpervi%of ll/ 11(r owl 11allk-; a �I. ix ilillp% oll illll�r4��l
fill(-%; handle. 11;11% of 1- 01.111cf.. p11 llil.an 111111�..11141
treasur\ hill. of �h4rt�lertn 11t.Ii11r l\. .11111 11(1111.
sectlrilir% issnl�cl fir guisf illlll�1.41 11\ fhr gll%rt1111lrut loll
to US$ 1A n3illi4rn. I.1�gWalli4n 111 111; I f�11glf\\rm41Ill,
authorily Ili guarantee loan� and itl\f��Ilnrnh
contracted by the 911%crnnlr11t .11141 141 Cf.iat
�0 11.01 \slur h.. In��n nt.lrinlrnl. ell f rMrlrhn.fn ill Ill[. 11.11.11(
are IKI%"l on .1 NO 411 YDI V%U fil. rflmti.r� 1.1 1,1ni1.1t% 11r.I
rurplifglill 111.111. 111(�11 ills lifloilli1% n sluin�tnrul� of
4111 ((,11(1111\ ill link�� ref fitr.+110.11 160% off olllrt
rltl
In _%lifi) PIT Ik fflirign ketskiler. in!rtf 41� urn
rU111411Y1 (11111) trail it I.%Ilrlir. .11141 Ihr %atif +11,11 ILIA
of Yrtnrn Ir4�(�.Ifile Illy collillm'% ssnl\ Rankine
in%lillllifn 1114� alin11a) 1i. �11k Inainl. +in� v \111
111.1111.11 11a11k� to Vivo .11111 �1�%1.11 fllif�r� 111 III,- 111.11fr
IlMW 111 Ihr 1 t'.Itl [fir 4' +1.11111.11111
%oltal 111.111 11.111k, to fatal .1141.1�
C. NnnNary policy
tiin1� F "e11r11.1r\ 1!M>