High food prices persist despite local currency appreciation, limiting food access for the poor

• Despite seasonal improvements, access to food and income remain below average for most poor families, especially those with irregular income or only one main source of income. On the one hand, poor households’ food consumption and dietary diversity slightly improved in April during the holy month of Ramadan due to associated in-kind and financial support (Zaka’a) provided by individuals and charities as well as increased remittances. In rural areas, peak selling prices of livestock are also increasing some pastoral families’ access to food and income, though poor households often have to sell livestock for income before the time period of peak prices. On the other hand, food prices remain significantly above average despite recent slight declines.

• Despite recent positive political and economic developments, including the formation of a new Presidential Leadership Council (PLC) and the announcement of significant financial aid packages from Gulf countries, the local currency has not yet stabilized and continues to fluctuate, especially in areas under IRG control. After a period of appreciation earlier in the month, the Yemeni Rial (YER) has been depreciating in late April, reaching 1,040 YER/USD in Aden and 561 YER/USD in Amanat Al Asimah (Sana’a city) by April 26. Overall, by April 26, the value of the YER remained around 17 percent and 5 percent higher in Aden and Amanat Al Asimah, respectively, compared to the same date in March 2022.

• Fuel supply and prices have significantly improved in areas under SBA control, alleviating severe fuel shortages ongoing since late 2021. As a result of the recently agreed ceasefire, 18 fuel vessels have been granted permission to berth and discharge at the Red Sea ports of Al Hudaydah and As Salif. According to UNVIM, 52,526 MT of fuel had been discharged from April 13 to 19. As a result, the Sana’a-based Yemen Petroleum Company (YPC) reduced the official price of petrol by 21 percent from 16,000 YER/20L to 12,600 YER/20L as of April 12, and further 5 percent reduction was announced on April 23. Meanwhile, on April 18, the YPC-Aden lowered petrol prices in Aden from 19,800/20L to 18,600/20L. However, fuel prices nationwide remain subject to changes in the local currency rate and global fuel prices.

• Though some households are likely experiencing temporarily improved food consumption and Stressed (IPC Phase 2) or Stressed! (IPC Phase 2!) outcomes, Crisis (IPC Phase 3) and Crisis! (IPC Phase 3!) outcomes are expected to remain widespread, with millions of poor families nationwide facing food consumption gaps or using negative livelihood coping strategies to meet their needs. Recent slight improvements are expected to be short-lived, as seasonal sources of food and income are exhausted and, in IRG areas, as purchasing power declines during the June to September projection period. Many poor households are likely to again face consumption gaps and Crisis (IPC Phase 3) or Crisis! (IPC Phase 3!) and Emergency (IPC Phase 4) outcomes, particularly in lowland areas during the agricultural off-season.

On April 2, a two-month truce brokered by the UN entered into force, coinciding with the advent of Ramadan. On April 7, Abed Rabbo Mansour Hadi stepped down as president of the internationally-recognized government (IRG) of Yemen, handing power to a newly established Presidential Leadership Council (PLC). In a decree before stepping down, he described the move as a “desire to involve effective leaders in managing the state in this transitional phase.” The new PLC is headed by Major General Dr. Rashad al-Alimi, temporarily in charge of Yemen’s political, military, and security sectors, and is supported by seven other members of the committee who in turn are supported by a commission of 50 appointed advisors. The PLC will end its term upon the election of a new president.

Despite the truce, repeated ceasefire violations have been reported by both parties. However, overall levels of violence have reduced significantly, and a ceasefire on airstrikes by the Saudi-led coalition and extra-territorial violence from within areas of Yemen controlled by the Sana’a-based authorities (SBA) has successfully lasted through April. According to a Yemeni security firm, the most frequent and intense violence in April has been reported in Marib—including ground fighting between the warring parties to the south of Marib city and alleged missile attacks on the city itself in the second week of April—followed by southern Al Hudaydah and western Taizz. Conflict has also continued to impact frontline areas in Hajjah, Sa’adah, Al Jawf, and Al Dhale’e.

Despite the ceasefire, tangible progress regarding several expressed priorities—including the re-opening of roads in Taizz, the resumptions of commercial flights to and from Sana’a airport, and prisoner exchanges—remains to be seen. However, the main parties to the conflict have reportedly now all signed an Action Plan with the UN to end and prevent the recruitment and use of children in armed conflict alongside other human rights violations, such as the targeting of schools and hospitals.

Despite reduced levels of conflict, ongoing conflict continues to cause new population displacement, though the number of new displacements has been declining steadily since January (Figure 1). According to the International Organization for Migration (IOM), 125 households (approximately 750 individuals) were newly displaced in the week of April 10 to 16 across monitored governorates (mostly IRG-controlled areas). Safety and security concerns related to conflict were the main reason for displacement, followed by economic reasons. In total, 5,348 households (approximately 32,088 individuals) had been displaced since the beginning of 2022 as of April 16 according to IOM. Since the beginning of the year, most displaced households were reported in Al Hudaydah (1,523 households), Marib (1,082 households), Shabwah (869 households), Taizz (723 households), Al Dhale’e (469 households), and Abyan (220 households).

Yemen’s public finances are heavily dependent on hydrocarbon activities (oil production), and revenue from this sector remains below average despite slight improvements in recent years. According to IRG estimates, economic losses due to the conflict that erupted eight years ago total an estimated 126 billion USD. However, the recent political developments including the formation of the PLC and the financial aid package of 3 billion USD pledged by Gulf countries—including 2 billion USD by the Kingdom of Saudi Arabia (KSA) and 1 billion USD by the UAE—in early April allowed the Aden-based government cabinet to approve the national budget for the coming fiscal year for the first time in eight years on April 18, alongside several fiscal and administrative reforms that aim to support overall economic improvements. Key aspects of the budget include support for commercial imports of key food commodities, improved disbursement of military and security sector salaries, increased funding for public services in Aden and Hadramout, and support for the health sector.

The foreign currency auction mechanism in place since November 2021 contributed to halting the trend of rapid currency depreciation in IRG-controlled areas and, in early April, the local currency appreciated in both IRG and SBA areas alongside the PLC formation and the announcement of Gulf financial aid package (Figure 2). However, the local currency has not yet stabilized, and the exchange rate continues to fluctuate nationwide. After slight appreciation in the third week of April to reach 880 YER/USD (selling rate) by April 18, the Yemeni Rial (YER) in Aden again depreciated, reaching 1,040 YER/USD by April 26. Recent depreciation is expected to be largely attributable to the absence of any action toward provision of the Gulf aid package and the April 24 attack on the Balhaf gas pipeline, the main pipeline connecting Aden to Marib. Meanwhile, after more than two years of relative stability around 600 YER/USD, the YER in Amanat Al Asimah (Sana’a city) also appreciated to reach 500 YER/USD following the announcement of the PLC, but has depreciated again to reach 561 YER/USD as of April 26. Overall, by April 26, the value of the YER remained around 17 percent and 5 percent higher in Aden and Amanat Al Asimah (Sana’a city), respectively, compared to the same date in March.

Fuel supply and prices have significantly improved in areas under SBA control, alleviating severe fuel shortages ongoing since late 2021. As a result of the recently agreed ceasefire, 18 fuel vessels have been granted permission to berth and discharge at the Red Sea ports of Al Hudaydah and As Salif. According to the United Nations Verification and Inspection Mechanism, 52,526 MT of fuel had been discharged from April 13 to 19. An additional 24,189 MT were in the process of discharging, and vessels with capacity of 60,827 MT were waiting to berth. As a result of improved supply, the Sana’a-based Yemen Petroleum Company (YPC) reduced the official price of petrol by 21 percent from 16,000 YER/20L to 12,600 YER/20L as of April 12, and further 5 percent reduction was announced on April 23. Meanwhile, the Aden-based YPC reduced official fuel prices twice in three days. On April 18, the YPC-Aden lowered petrol prices in Aden from 19,800/20L to 18,600/20L. However, fuel prices nationwide remain above average and subject to changes in the local currency rate and global fuel prices.

Yemeni households fulfill their basic food requirements mainly through market purchases. Markets are supplied largely by commercial imports, while local agricultural production contributes less than 10 percent of national cereal consumption requirements. According to the Ministry of Trade and Industry (MTI) in Sana’a and the Yemen Standardization, Metrology and Quality Control Organization in Aden, an estimated 1,482,946 MT of food was imported through all of Yemen’s main sea and land ports in the first quarter of 2022, 6 percent less than the same time period of last year (Figure 3). Of this total, more than 70 percent was wheat grain, with the 1,058,100 MT imported similar to the same time period of last year (2 percent less). Despite concerns related to the conflict in Ukraine, food imports have not displayed any signs of disruption as of April, according to the MTI. As of April 20, stocks of wheat grain at Al Hudaydah and As Salif silos were estimated at 364,000 MT according to the MTI, with an additional 380,000 MT contracted by importing companies for the period of April to June 2022. In total, this is expected to be enough to cover consumption requirements in SBA-controlled areas for the coming six months. Meanwhile, though recent information regarding wheat grain stocks in IRG-controlled areas is not available, the MTI estimated in March 2022 that stocks would be enough to last for three months.

In IRG-controlled areas, food prices have declined in April alongside appreciation of the currency. However, compared to the 17 percent appreciation that occurred from March 26 to April 26, key informants estimate that prices of most basic imported food commodities have declined by only around 5 percent in Aden, on average. Additionally, price decreases for most commodities have been slight compared to the significant increases that occurred in March following the Russian invasion of Ukraine. One notable exception is cooking oil prices, which have declined significantly in April to reach levels similar to those recorded in early February before the Ukraine crisis. Meanwhile, in SBA-controlled areas, the MTI in Sana’a has issued a circulation ordering all traders to reduce food prices in light of the local currency appreciation and provide the ministry with a list of adjusted prices by late April. Overall, food remains available in markets and the main challenge that households are facing is inability to afford food at significantly above-average prices.

Cumulative rainfall during Yemen’s first rainy season (March to May) has been below average across most of the country, with deficits of as much as 25-50 mm recorded over highland areas as of late April, according to data from CHIRPS. This is likely leading to below-average pasture conditions in highland areas according to satellite data, though pasture and livestock body conditions are expected to be seasonally improving, as is typical along with the progression of the rainy season. In Hadramout Al Wadi (in the eastern plateau) and in coastal areas, pasture conditions are expected to be seasonally declining. In rural areas, peak selling prices of livestock during Ramadan and in advance of the Eid al-Fitr holidays are increasing some pastoral families’ access to food and income. However, rising costs of livestock production inputs including for commercial fodder and veterinary care continue to strain pastoralist livelihoods across the country. Given rising prices of inputs and essential food and non-food items, poor households often have to sell livestock to earn income before the time period of peak prices in order to avoid food consumption gaps.

Agricultural activities in the highlands—including for qat and wheat production—are expected to be seasonally increasing. In the northern highlands, the winter wheat harvest has likely concluded in April. Meanwhile, the main wheat harvest in the eastern plateau is expected to have concluded by mid-April. In coastal areas, agricultural households are experiencing typical seasonal improvements in access to income from crop sales during the peak period of fruit (mango and banana) and vegetable harvesting. Also in coastal areas, fishing activities are currently expected to be providing fishing households with increased access to food and income during the peak fishing season that lasts through May. In Socotra, the peak fishing season is ongoing alongside the harvest season for spring millet, fruits, and vegetables.

According to WFP reporting, 13.3 million people were planned to be targeted with general emergency food assistance across Yemen in March 2022, to include distribution of 87,300 MT of in-kind general food, 21,300 MT of food provided through commodity vouchers, and 11.3 million USD of cash transfers. More recently, in April, the ongoing reduction in conflict has facilitated delivery of humanitarian assistance to some previously hard-to-reach areas. For example, a local NGO was able to reach Khudaish locality in Hajjah governorate, where 12,000 individuals have reportedly not been reached with assistance in the past three years. Additionally, the increase in fuel availability and declining prices is expected to have reduced transportation costs for assistance delivery.  However, main transport roads—including the Taizz Howban-to-Inner-City roads, the Hays and Jarrahi roads which connect Al Hudaydah and Taizz governorates, the Murais road in northern Al Dhale’e, and roads in southern Marib and western Shabwah districts—remain closed, challenging logistics. Despite improvements in reach in some areas, 8 million beneficiaries of regular monthly assistance distributions in Al Maharah, Aden, Hadramout, Taizz, Al Hudaydah, Sa’ada, Al Mahwit, Dhamar, and Raymah governorates continue to experience ration reductions, and beneficiaries in SBA-controlled areas of Amanat Al Asimah, Sana’a, Ibb, and Al Bayda continue to receive assistance only once every two months.

In both urban and rural areas, poor households’ food consumption and dietary diversity have slightly improved in April during the holy month of Ramadan due to associated in-kind and financial support (Zaka’a) provided by individuals and charities as well as increased remittances. In rural areas, peak selling prices of livestock are also increasing some pastoral families’ access to food and income, and the start of the agriculture season in highland areas and cereal harvesting in the northern highlands is expected to be improving rural households' access to food and income from labor opportunities and own production. Meanwhile, the harvest of summer fruits and vegetables in coastal areas and higher demand during Ramadan is expected to be improving access to income from wages and crop sales. Despite recent slight declines, food prices remain significantly above average, and access to food and income remain below average for most poor families. Even basic staple foods remain unaffordable for many, especially those with irregular income or only one main source of income. Though some households are likely experiencing temporarily improved food consumption and Stressed (IPC Phase 2) or Stressed! (IPC Phase 2!) outcomes, Crisis (IPC Phase 3) and Crisis! (IPC Phase 3!) outcomes are expected to remain widespread at the governorate level, with millions of poor families nationwide likely facing food consumption gaps or engaging in damaging livelihood coping strategies to meet their needs.

The assumptions used to develop FEWS NET’s most likely scenario for the period of March to September 2021 remain unchanged, except the following:

• Given reported breaches of the ceasefire and the SBA’s lack of participation in peace negotiations to date, it is expected that the two-month period of reduced conflict will be followed by an increase in fighting. Re-opening of roads in Taizz and other governorates is not expected to be achieved during the projection period, and further negotiations for a lasting ceasefire agreement will likely be required to support the prospect of peace in Yemen.
• Given recent political developments including the formation of the PLC, it is expected that IRG revenue from oil exports and customs duties will likely slightly improve during the projection period. Political developments will also likely facilitate improved flows of revenue to the CBY-Aden, enabling the government to better fulfill some of its commitments, including paying government salaries and supporting public services.
• The recent 3 billion USD financial assistance package pledged by the KSA and UAE in early April is conditioned upon reforms, including in the military sector, which are likely to take at least a couple of months to implement. However, given recent positive steps toward implementing reforms as well as good relations between the new PLC leader and the KSA, it is expected that the deposit will be received late during the projection period, though significant uncertainty exists. See the “events that might change the outlook” table below for an overview of how the analysis would change should the assistance package not be received during the projection period.
• Given expectations for the Gulf assistance package, government revenue, and sustained humanitarian operations, it is likely that the CBY’s foreign currency reserve levels in Aden will increase upon receipt of the Gulf financial deposit and remain higher than the previous year’s levels. This is expected to support and sustain the currency auction mechanism during the projection period. However, lasting peace and sustained economic recovery is necessary to provide sustainable sources of government revenue.
• Given recent trends, the local currency in IRG-controlled areas is likely to continue to depreciate overall prior to receipt of the Gulf financial deposit, remaining below 1,300 YER/USD, though significant uncertainty exists. During this time, continued volatility in the exchange rate is anticipated, with periods of appreciation expected alongside news of progress regarding the Gulf deposit or other positive economic reforms, and with periods of depreciation expected otherwise. Upon receipt of Gulf deposit, based on historical trends, the YER is expected to appreciate but is expected to remain above 800 YER/USD, though significant uncertainty exists. Meanwhile, in SBA-controlled areas, the exchange rate is expected to remain relatively stable near current levels and remain below 600 YER/USD.
• Fuel is expected to remain generally available across the country. In IRG-controlled areas, fuel prices are likely to fluctuate alongside the exchange rate but are expected to increase overall throughout the projection period given expectations for rising global prices and the overall trend of currency depreciation anticipated prior to receipt of the Gulf deposit. Upon receipt of the Gulf deposit, fuel prices are expected to decline alongside anticipated currency appreciation but will likely remain above average. Meanwhile, in SBA-controlled areas, given improved fuel availability, fuel prices are expected to remain relatively similar to current levels, though increases alongside rising global prices remain possible.
• Prices of staple wheat flour (imported) in the IRG reference market of Aden are expected to increase overall given expectations for depreciation of currency and rising global cereal prices. Upon receipt of the Gulf deposit, prices are likely to decrease but remain above average. Meanwhile, in the SBA reference market of Amanat Al Asimah (Sana’a city), wheat flour prices are expected to decline slightly given controls by the MTI in Sana’a. Overall, basic food prices are expected to remain high due to rising food and fuel prices globally and high transportation costs nationwide.

The recent slight improvements in food security are likely to be short-lived, as seasonal sources of food and income are typically exhausted after Ramadan. In IRG-controlled areas, prices of fuel and food are also expected to increase in the coming months, straining households’ available resources from limited income-earning. However, any households who benefit from improved income-earning given improvements in government salary payments are likely to experience improved purchasing power and food consumption. Overall, most poor households are expected to resume facing consumption gaps given exhaustion of seasonal resources, declining purchasing power in IRG-controlled areas, and continued assistance ration reductions in affected governorates. Throughout the projection period, some poor households in highland areas are expected to continue to have some limited income-earning opportunities from different cereal and vegetable production activities. In lowland areas, however, income-earning opportunities are expected to be highly limited due to the agricultural off season. At the governorate level, widespread Crisis (IPC Phase 3) and Crisis! (IPC Phase 3!) outcomes are expected to persist throughout the projection period, with additional households likely to deteriorate to Crisis (IPC Phase 3) or Crisis! (IPC Phase 3!) and Emergency (IPC Phase 4) across the country, particularly in lowland areas.

Events that Might Change the Outlook

In addition to those included in the March 2022 Food Security Outlook, possible events that could change the most-likely scenario through September 2022 include: