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US eager to send foreign aid to Yemen, a land battling poverty and Al Qaeda

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“Yemen does not need to live on handouts,” says Mohammad Abulahoum, leader of the Justice and Building Party and a prominent Yemeni politician. “If we become a welfare state, we will become a failed state. … Provide Yemen with aid, but then increase investment in the country.”

Of $5.5 billion pledged, only 7 percent spent

The International Monetary Fund has already indicated a willingness to discuss new aid programs in Yemen now that former leader Ali Abdullah Saleh has been removed and the situation is calmer. Other foreign donors are likely to follow suit if Yemen can maintain some degree of stability.

Calculating the level of aid a country can handle predictably varies from place to place, but there are some general indicators for whether aid will succeed.

A study by the Center for Global Development found that when the level of aid approaches 15 to 25 percent of a country’s gross domestic product (GDP) it begins to have diminishing returns. In Afghanistan, where aid and international military spending now account for 97 percent of the nation’s GDP, the World Bank has warned of economic collapse if donors aren’t careful about slowly weaning the country off aid.

“International aid is very critical in the short-term, but I am afraid that in the medium- and long-term it could distort the Yemeni economy,” says Mohammed Al-Maitami, a professor of economics at Sanaa University in Yemen’s capital. “I think the international community today is more aware than before about how to help Yemen in the right way. They have gained a lot of experience in many countries, including Afghanistan, and learned that aid itself can’t make the country sustainable.”

It remains unlikely that a country like Yemen, on the fringes of the international consciousness, will receive extreme levels of aid like those seen in Afghanistan. However, the country has already shown difficulty absorbing even relatively small quantities of assistance.

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