Yemen sets 2013 budget with $3.2 bln deficit

DUBAI, Dec 23 (Reuters) - Yemen's cabinet on Sunday approved

a draft budget for 2013 that projects a deficit of 682 billion

rials ($3.17 billion) and expenditure of 2.77 trillion rials,

state news agency SABA reported.

The impoverished Arabian Peninsula state is still grappling

with the aftermath of last year's violent political turmoil that

led President Ali Abdullah Saleh to step down in February; the

government has sought billions of dollars of aid to overcome

financial and security challenges.

SABA said the draft budget, which now awaits approval in

parliament, projected revenue of 2.08 trillion rials.

Next year's forecast deficit is 21 percent higher than the

deficit originally projected by the government for 2012, while

expenditure is about 2 percent higher. In April, Yemen approved

a 2012 budget with a deficit of 562 billion rials and

expenditure of 2.70 trillion.

Restoring stability in Yemen, which is battling Islamist

militants with Washington's help, has become an international

priority because of fears that al Qaeda could become further

entrenched in a country which flanks top oil producer Saudi

Arabia and lies along major shipping lanes.

International donors including Saudi Arabia have pledged

around $8 billion in aid over the next couple of years to Yemen,

which was driven to the verge of bankruptcy and plunged into

factional anarchy by the year-long uprising against Saleh.

The economy of Yemen, where 40 percent of the population

lives on less than $2 a day, shrank 10.5 percent in 2011, the

International Monetary Fund estimated. In October, it forecast

the economy would shrink 1.9 percent this year.

The official inflation rate spiralled as high as 25 percent

year-on-year in October 2011; it subsided to 6.9 percent in July

this year, latest central bank data show.

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