Economic deterioration to sustain large scale of food insecurity in IRG areas

• The scale of acute food insecurity in Yemen is likely to remain elevated through January 2024, with increasing needs alongside deteriorating economic conditions in areas controlled by the internationally-recognized government (IRG) expected to be counterbalanced by slightly declining needs in areas controlled by the Sana’a-based authorities (SBA). Meanwhile, although the main cereal harvest from October to December will temporarily improve access to food and income for many rural households, income from crop production is now expected to be below the five-year average due to revised forecasts for below-average rainfall during Yemen’s second rainy season. Given this and reductions in humanitarian assistance provision, poor households will remain highly reliant on markets for food amid above-average prices and limited income-earning opportunities. Though some localized improvement (particularly in SBA areas) and some localized deterioration (particularly in IRG areas) is expected, Crisis (IPC Phase 3) and Crisis! (IPC Phase 3!) outcomes are expected to remain widespread at the governorate level.
• Following a slight uptick in conflict in late July, frontlines remained relatively quiet in August. However, the major parties to the conflict have engaged in escalatory rhetoric and intimidatory military actions in August. On the other hand, in late August, an Omani delegation visited Sana’a, representing the first positive step in peace negotiations since talks stalled in April. 
• While active conflict remains suppressed, economic warfare between the IRG and SBA is ongoing, with Yemeni citizens suffering the greatest harm. Notably, the IRG continues to face severe shortages of revenue due to the SBA’s blockade of oil exports from IRG-controlled ports as well as the SBA’s blockade of imports from IRG areas via land borders. The provision of public services in IRG-controlled areas continues to worsen, with blackouts in Aden reaching 20 hours per day in August and rising levels of civil unrest recorded in Aden and other IRG-controlled areas. Though the Kingdom of Saudi Arabia (KSA) recently committed 1.2 billion USD to support the IRG economy, with the first installment deposited in early August, the support will provide only limited and temporary relief. 
• In July 2023, the cost of the minimum food basket (MFB) was over 26 percent higher than the five-year average across SBA-controlled areas and over 100 percent higher than the five-year average across IRG-controlled areas. In IRG-controlled areas, food prices are expected to increase further throughout the projection period, driven primarily by depreciation of the local currency amid severe revenue shortages. Though wage rates will also likely increase in some IRG-controlled governorates, driven by inflation, suppressed economic activity and high competition for limited labor opportunities will likely result in stable wage rates despite inflation and, consequently, deteriorating purchasing power in other IRG-controlled governorates.

Following several months of stalled efforts to establish longer-term peace between the Sana’a-based authorities (SBA) and the internationally-recognized government (IRG) and its affiliates, an Omani delegation visited Sana’a from August 17-21 to discuss re-starting the negotiations. According to a Yemeni security firm, the key topics of discussion included the resumption of oil exports from IRG-controlled seaports, the expansion of flights from Sana’a airport, the re-unification of currencies in IRG- and SBA-controlled areas, and the payment of public sector salaries using oil revenues. Though a positive step, no concrete progress was reported from the visit. Overall, the path forward will remain slow and difficult, as neither side is showing willingness to make concessions in their demands. On the other hand, a concurrent visit by the Iranian Foreign Minister to the Kingdom of Saudia Arabia (KSA) in mid-August is a potentially positive signal for the future negotiating environment.

A slight uptick in conflict occurred in late July, according to data and information from the Armed Conflict Location and Event Data Project (ACLED) and a Yemeni security firm, though levels of conflict remained notably lower than pre-truce levels and quieted again in August. Frontlines in Marib, Taizz, Al Dhale’e, southern Al Hudaydah, Shabwah, and Al Bayda remain the most active (Figure 1). However, in July and August, the SBA continued to reinforce positions and conduct military maneuvers in Marib. Additionally, SBA forces clashed with tribal actors along the Al Jawf-Marib border and Al Jawf’s western border with Sa’ada in June and July, driven by the killing of a SBA leader, leading to disruptions in normal movement and access along the border areas. Meanwhile, in the south, an upsurge in Al Qaeda activity in late July into early August – primarily affecting Abyan, Shabwah, and Al Bayda governorates – was followed by the start of a new operation in early August to clear areas of AQAP fighters, with a decline in Al Qaeda attacks recorded by late August. 

According to reports from a KSA news outlet, SBA forces deployed naval mines off the Red Sea coast in mid-July. Such mines have the potential to disrupt international shipping, including by increasing shipping and insurance costs. Sea mines also threaten the livelihoods of local fishermen. This act follows intensification of coastal patrols in Al Hudaydah. Though the rationale is unclear, these moves could be related to efforts to increase control over international shipping routes in the Red Sea.

According to IOM monitoring data, about 13,000 individuals were displaced across monitored areas (generally IRG-controlled) between April and mid-August 2023. About 70 percent were displaced for economic reasons, with the majority of the rest displaced due to conflict. In July, the number of newly displaced individuals increased by 42 percent compared to June, with most displacement in July attributed to conflict.

Despite the decline in active fighting, both parties continue to engage in economic warfare tactics. Notably, the SBA blockade of oil exports from IRG-controlled seaports (using the threat of drone strikes) has been ongoing since October 2022. Oil exports previously provided the IRG’s most important source of revenue, accounting for 70 percent of total revenue before the conflict.  As such, the total loss of oil export revenue for the past 10 months has cost the IRG over one billion USD based on FEWS NET’s calculations. Additionally, crude oil production has declined by around 85 percent as a result of the loss of export markets, from an average of 55,000 barrels per day in 2022 to an average of 8,500 barrels per day in June 2023. 

Meanwhile, SBA authorities continue to enforce measures to prevent the importation of goods from IRG-controlled areas via land borders in an effort to redirect imports through the SBA-controlled Red Sea ports. This has reduced the IRG’s revenue from customs and taxes. In August 2023, negotiations to open roads between Ta’izz and Anatolia for humanitarian use stalled after the SBA authorities issued new demands. In addition to blocking and hindering trade, the SBA also banned the use of locally-produced gas cylinders in SBA-controlled areas of Marib. These measures are estimated to be costing the IRG nearly 50 billion Yemeni rials per month in customs and taxes.

In a step to combat the SBA’s efforts to re-direct imports to the Red Sea ports, On August 13, 2023, IRG authorities signed a memorandum of understanding with the United Nations to reduce the cost of marine insurance on ships entering seaports in IRG-controlled areas. The agreement is expected to lower the cost of insuring ships (currently sixteen times higher than at the start of the war), thus attracting more ships into IRG-controlled seaports and allowing the IRG to benefit from the collection of customs duties on imported goods. The agreement is planned to be finalized in September 2023. 

Despite concerns due to shortages of revenue and foreign currency, the Aden-based Central Bank of Yemen (CBY-Aden) has stated that it will be able to continue holding weekly foreign currency auctions, supported by available reserves in international banks and recent financial support from the KSA. On August 1, the KSA announced a new 1.2 billion USD grant to support the Yemeni economy. On August 2, the first batch of funds equivalent to around 267 million US dollars (1 billion Saudi Riyals) was deposited in the CBY-Aden. 

Severe shortages of revenue and foreign currency along with associated general market uncertainty have led to further depreciation of the Aden-based rial in July 2023. According to data from FAO, the Aden-based rial depreciated by 4 percent between June and July 2023, on average, reaching 1,412 YER/USD, its lowest value since the exchange rate plunged to 1,465 YER/USD in November 2021. The value in July 2023 reached levels 25 percent lower than the same time last year and 80 percent lower than the five-year average. Though the announcement of the financial deposit from the KSA and receipt of the first batch of funds triggered a slight (2 percent) appreciation of the Aden-based rial, the currency depreciated again throughout August, reversing the temporary improvement.

The value of the Sana’a-based rial remained relatively stable in July at 530 YER/USD, having appreciated slightly by nearly 5 percent compared to the same time last year. The stability of the Sana’a-based rial is a result of the war for monetary control waged by the SBA which escalated into a currency war in December 2019 after the SBA instituted strong currency controls including the banning of newly printed Yemeni rial bank notes in SBA-controlled areas, the introduction of an e-Rial, and the close control of foreign currencies. On the contrary, the Aden-based central bank pursues a flexible foreign exchange rate regime through monetary supply policies which have not been effective.

From January to July 2023, a total of 3,167,872 MT of basic food commodities were imported through all of Yemen’s major ports according to WFP data. Of this total, around three quarters entered through the SBA-controlled Red Sea ports, with the remaining entering through the IRG-controlled Aden and Mukalla ports. Food import levels in July declined by 31 percent in SBA-controlled ports but increased by 19 percent in IRG-controlled ports, compared to June; however, these shifts are not outside of what might be expected due to typical month-to-month volatility. Overall, from January to July 2023, the amount of food imported through IRG-controlled ports was 13 percent higher than last year but 21 percent lower than the four-year average, while the amount imported through SBA-controlled ports was similar to last year but 11 percent higher than the four-year average (Figure 2). Despite SBA authorities pressuring traders, there is not yet strong evidence of a meaningful shift in food import levels compared to last year. However, last year was unusual given the supply chain disruptions that followed the Ukraine invasion and these data suggest a shift toward SBA-controlled ports when compared to the four-year average.

Overall, the availability of fuel for consumers remains stable nationwide, despite a decline in fuel import levels through IRG-controlled seaports in 2023 to date. From January to July 2023, a total of 817,184 tons of fuel were imported through the IRG-controlled ports of Aden and Mukalla. Though the January to July period is almost 60 percent of the year, this amount of fuel is only 40 percent of the total imported via IRG-controlled ports throughout all of 2022. Despite this, official prices of petrol and diesel in the IRG reference market of Aden have remained generally stable in recent months. According to data from FAO, as of July 2023, official prices¹ of petrol were similar (2 percent higher) compared to the prior month and marginally (4 percent) lower than last year in the Aden market, but still double the four-year average. Official prices of diesel were similar (2 percent lower) compared to the prior month and 22 percent lower than last year, but 48 percent higher than the four-year average. Meanwhile, fuel importation through the SBA-controlled seaports of Al Hudaydah and As Salif has continued at relatively high levels, with a total of 1,584,005 tons of fuel discharged between January and July 2023. This total is nearly double the amount discharged during the same time period of last year and nearly double the four-year average. In July 2023, official petrol prices in the SBA reference market of Amanat al Asimah (Sana’a city) were similar (3 percent lower) to those recorded in the prior month, 9 percent lower than last year, but 17 percent higher than the four-year average. Official diesel prices in Amanat al Asimah were 8 percent lower than the prior month, but 14 percent higher than the previous year and 19 percent higher than the four-year average. 

Yemen’s second rainy season (July to September) has been characterized by below-average cumulative rainfall to date as of August 25 (Figure 3). Though vegetation conditions were still significantly above average as of mid-July following very good rainfall in Yemen’s March to May first rainy season earlier in the year, the recent below-average rainfall coupled with above-average July temperatures has resulted in atypically stagnation or deterioration of vegetation growth, with below-average conditions again prevailing across most of the country by mid-August (Figure 4). 

In August, many rural households are also likely benefiting from improvements in livestock production alongside seasonal pasture availability in the highlands. However, the impacts of the conflict – including overall reduced herd sizes and constrained access to cross-border markets – continue to limit the contribution of livestock to food and income for poor households. Meanwhile, the onset of the fishing season in Red Sea coastal areas in July has likely slightly improved access to food and income from fishing for many poor households in coastal areas of Al Hudaydah, Hajjah, western Ta’izz, and Sa’ada. However, food and income from fishing remains below pre-conflict levels due to negative impacts of the conflict on fishing livelihoods including restricted access to fishing areas, lack of cold chain storage, and above-average fuel costs.

Staple wheat flour prices were generally stable or declined slightly in most governorates from June to July 2023, according to FAO data (Figure 5). The exception was a 23 percent increase in wheat flour prices recorded from June to July in Amanat al Asimah; however, this followed a nearly commensurate (19 percent) decrease from May to June. Though anomalies in the data cannot be ruled out in explaining the month-to-month volatility from May to July, there are anecdotal reports of traders in Shomailah market (one of the three monitored markets in Amanat al Asimah) hoarding the commodity while speculating about potential price increases following the expiration of the Black Sea Grain Initiative.² As of July, prices of staple wheat flour in the Amanat al Asimah reference market were 23 percent lower than last year but remained 24 percent higher than the five-year average. In the Aden reference market, July prices were 9 percent higher than last year and more than double the five-year average. Meanwhile, the price of non-basmati rice remained stable in both reference markets despite India’s export ban, though this could be the result of a response lag as 40-60 percent of Yemen’s rice imports are sourced from India.

The total cost of the minimum food basket (MFB) has generally followed similar trends as those recorded for staple wheat flour. In July 2023, the cost of the MFB in the Aden reference market was similar to the previous month but 7 percent higher than last year. In Amanat al Asimah, the cost of the MFB was similar to the previous month but 13 percent lower than last year. However, the cost of the MFB remains higher than the five-year average, by 25 percent in Amanat al Asimah and by 98 percent in the Aden, indicative of significantly above-average food prices across Yemen.

According to FAO data, wage rates for both casual (unskilled) and agricultural labor remained stable or increased from June to July in most governorates. The exception was for casual labor wage rates in Abyan, which declined by 9 percent from June to July. Meanwhile, compared to last year, wage rates in July 2023 were generally similar to last year (3 percent higher for casual laborers and 2 percent higher for agricultural laborers) on average across SBA areas and higher than last year – by 16 percent for casual laborers and by 10 percent for agricultural laborers – on average across IRG areas, driven by inflation. However, trends were highly mixed across governorates, with many governorates registering declining wage rates compared to last year. Compared to the four-year average, wage rates remain higher across the country, due to inflation.

Trends in the real value of wages are further complicated by trends in food prices, with many IRG areas seeing rising prices and many SBA areas seeing falling prices over the past year. When considering both labor wage rates and staple wheat flour prices, purchasing power for laborers as measured by the terms of trade³ between wage rates and the cost of wheat flour displayed highly mixed trends across governorates (Figure 6). Most governorates that have seen declining terms of trade compared to last year – such as Aden, Al Maharah, Hadhramaut, Lahij, Shabwah, and Socotra, are largely controlled by the IRG. However, Amran is fully SBA-controlled territory.

According to WFP reporting, about 2.9 million people in Yemen received emergency humanitarian food assistance in June as part of distribution cycles 2 and 3 of 2023. This is around 22 percent of the total 13.1 beneficiaries targeted by WFP on a cyclical basis. Of the 2.9 million reached in June, about 1.9 million or 64 percent were in IRG areas while the remaining 1.1 million or 36 percent were in SBA areas. Around 96 percent of disbursements were in the form of in-kind food, while the rest were cash transfers. More recently, WFP has reported that significant delays in distributions pushed the fourth cycle of distributions into mid-July. WFP continues to distribute rations equivalent to 65 percent of a household’s needs for a one-month period. Though WFP reports that distributions are planned to occur once every 45 days, significant delays are leading to longer gaps between distributions. Additionally, beneficiary households are known to share assistance with non-beneficiaries within their communities, stretching rations further. As such, most beneficiary households are expected to be meeting notably less than one third of their total minimum basic food needs from humanitarian assistance. 

Current Food Security Outcomes

As of late August, most rural households have likely already exhausted food stocks from the spring harvest of cereals that was completed in June. Although above-average rainfall in the March to May first rainy season supported crop production, food crop production remains limited and significantly below pre-conflict levels due to constraints to production including high costs of fuel and agricultural inputs, limited access to agricultural land in conflict-affected areas, and inadequate control of pests and diseases. Currently in August, poor households are also facing seasonally low access to food and income – particularly in lowland areas – due to seasonally low levels of agricultural production activity. Overall, the majority of poor households continue to experience constrained income-earning opportunities, above-average food and non-food prices, and reduced levels of humanitarian assistance. The number of households facing Crisis (IPC Phase 3) or worse outcomes has likely increased slightly in August alongside local rural lean seasons. At the governorate level, Crisis (IPC Phase 3) and Crisis! (IPC Phase 3!) outcomes are expected to remain widespread, with worst-affected households facing Emergency (IPC Phase 4) or worse outcomes. 

The assumptions used to develop FEWS NET’s most likely scenario for the Yemen Food Security Outlook for June 2023 to January 2024 remain unchanged, except for the following:

• Cumulative rainfall during the July to September second rainy season is now forecast to be below average.

• Though vegetation and pasture conditions are still expected to seasonally improve through October due to the rainy season, improvements are likely to be less than typical and conditions are likely to be below average overall due to the forecast for below-average second season rainfall alongside forecast above-average temperatures. Similarly, conditions are likely to remain below average and decline atypically early from November 2023 to January 2024.

• Given the forecast for below-average rainfall, farmers are likely to increase reliance on irrigation, raising production costs due to the need to purchase fuel to power pumps. This will reduce profit margins for irrigated crops. Farmers in IRG-controlled areas will likely be particularly negatively impacted given expectations for rising fuel prices in IRG-controlled areas.

• Rainfed cereal crop production is likely to be below the four-year average in areas that experience the worst rainfall deficits, though this is dependent on the timing and distribution of rainfall received. 

• Prices of non-basmati rice are expected to increase due to rising global prices in response to the tightening global supplies resulting from India’s export ban.

The number of households facing food consumption gaps and Crisis (IPC Phase 3) or worse outcomes will remain at peak levels in September alongside the peak of the lean season in lowland areas. Following this, the main harvest of cereals (October to December) will slightly and temporarily boost rural households’ access to food starting in October. Given this and improvements in availability of agricultural labor opportunities, the number of households facing food consumption gaps and Crisis (IPC Phase 3) or worse outcomes is expected to decline in the October 2023 to January 2024 period. Food stocks are generally expected to last around 2-3 months (though less in areas that experience reduced production due to rainfall deficits during critical growing periods), supporting slightly improved access to food for many poor households through January 2024.

Meanwhile, throughout the remainder of the projection period, households in IRG-controlled areas are likely to face declining access to income given the deteriorating economic situation, which will likely result in reduced demand for labor and further disruptions to civil servant salary and pension payments, further reducing income-earning among poor households in IRG-controlled areas. At the same time, prices in IRG-controlled areas are expected to increase, further straining households’ already limited resources. This will likely drive additional households to face food consumption gaps and Crisis (IPC Phase 3) or worse outcomes in IRG-controlled areas. Concern also exists for large gaps between assistance distributions, particularly affecting beneficiaries who typically receive cash transfers due to the greater vulnerability of the cash pipeline to funding shortfalls. On the other hand, expectations for slight economic improvement in SBA-controlled areas will likely result in some gradual improvement in income-earning. This alongside expectations for stable food prices will likely drive a slight reduction in the number of households facing Crisis (IPC Phase 3) or worse outcomes over the course of the projection period. 

Overall, however, the above shifts are expected to be slight compared to the millions of Yemenis expected to be facing food consumption gaps. At the governorate level, (IPC Phase 3) and Crisis! (IPC Phase 3!) outcomes are expected to persist throughout the projection period, with worst-affected poor households likely to face Emergency (IPC Phase 4) or worse outcomes.