Improved purchasing power mitigates negative impacts of assistance cuts

• In October, the start of the main cereal harvest season will provide some increased access to food and income for rural households. However, millions of households nationwide will remain unable to meet their minimum food needs due to highly limited livelihood and income-earning opportunities, and, in areas controlled by the internationally-recognized government (IRG), rising food prices. Amid assistance cuts, Crisis (IPC Phase 3) and Crisis! (IPC Phase 3!) outcomes are expected to remain widespread through January 2024, with an estimated 50-55 percent of the population in need of food assistance. Over the course of the projection period, needs are expected to decline slightly in areas controlled by the Sana’a-based authorities (SBA) alongside improvement in income-earning opportunities and stable purchasing power. Meanwhile, needs are expected to increase slightly in IRG-controlled areas alongside a reduction in income-earning opportunities and purchasing power due to inflation.

• Conflict between the SBA and IRG has not re-escalated since the truce expired in October 2022. The reduction in conflict has led to some slight improvements in the business and trade environment. Overall, however, full recovery of livelihoods and income-earning opportunities will take many years of sustained economic recovery.

• The SBA continues to effectively block oil exports from IRG-controlled seaports using the threat of drone strikes, denying the IRG their key source of revenue. Meanwhile, both sides are competing for imports through seaports under their control, with the SBA blocking the movement of goods from IRG- to SBA-controlled areas via land borders. Given the loss of oil export revenue and some tax revenue associated with exports to SBA areas, the IRG is experiencing worsening shortages of government revenue and foreign exchange.

• In IRG-controlled areas, the local currency has continued to depreciate, driving a further increase in food prices over the past year (though the pace of increase was slower compared to the prior year). Meanwhile, in SBA-controlled areas, food prices have declined slightly compared to the same time last year due to declining global food prices, declining domestic fuel prices, and associated price ceilings enforced by SBA authorities. Given food price trends and rising labor wage rates in many governorates – particularly in IRG-controlled areas, driven by inflation – purchasing power has improved or remained stable in many governorates compared to last year. However, notable variability exists across governorates.

• Due to funding shortfalls, the provision of humanitarian assistance has been reduced further in 2023. Households are now expected to be receiving distributions around once every eight weeks, though key informants report that households who receive cash transfers – especially in Aden and Lahj – are receiving distributions less frequently. Given that each distribution is expected to provide rations equivalent to 65 percent of a household’s minimum energy requirements for a one-month period, the total contribution of assistance to households’ food needs has declined notably, to around one third of households’ total minimum energy needs, down from the 80 percent that households were receiving through the end of 2021. Additionally, many beneficiary households are likely meeting an even lower share of their food needs from assistance due to sharing of rations.

Current Situation

There has been no notable progress in the ongoing peace negotiations since Ramadan in April, when talks stalled. Officials of the Sana’a-Based Authorities (SBA) insist they are still open to dialogue but that their demands laid out during the visit of the Saudi delegation to Sana’a have yet to be satisfactorily answered. International diplomacy in support of the talks is continuing; however, parallel negotiations over issues such as prisoner exchanges have also been on hold, with neither side showing any willingness to make concessions. Despite the stalled progress of negotiations, the unofficial truce remains in place.

Levels of conflict in May remained relatively low, similar to the levels recorded in the months since the expiration of the official truce in October 2022, according to data from the Armed Conflict Location and Event Data Projection (ACLED) (Figure 1). In May, 65 battles were recorded, with the greatest number occurring in Taizz (12), Abyan (11), Marib (11), Shabwah (11), and Lahj (8). Incidents of explosions/remote violence in May (including shelling, drone strikes, and incidents involving remote explosives/landmines) were concentrated in Al Hudaydah (35), Taizz (29), and Sa’ada (23).

According to International Organization for Migration (IOM) monitoring data, a total of 246 households (around 1,476 individuals) were newly displaced from monitored governorates (mostly in areas controlled by the Internationally Recognized Government [IRG]) in May. Of those newly displaced in May, 85 percent were displaced due to conflict, 14 percent were displaced due to economic reasons, and 1 percent were displaced due to natural disasters. The greatest number of people were displaced from Taizz (84 households, most of whom moved to locations within Taizz and Al Hudaydah), Al Hudaydah (43 households, most of whom moved to other locations within Al Hudaydah), and Marib (38 households who moved to other locations within Marib). The total number displaced in May was less than half of the number displaced in the prior month, when a surge in conflict in Marib displaced hundreds of households, and less than two-and-a-half times the number displaced in May of last year. The top need reported by displaced households in May 2023 was shelter (37 percent), followed by financial support (33 percent) and food (17 percent).

Economic warfare continues between the IRG and SBA (the major parties of the conflict), with SBA authorities taking further measures to prevent importation of goods from IRG-controlled areas via land borders in an effort to redirect imports through the SBA-controlled Red Sea ports. In early June, SBA authorities detained hundreds of trucks loaded with wheat flour from Aden at the Al-Rahda customs entry point in Taizz governorate, causing heavy losses to traders. After several weeks, the trucks were only allowed to pass once traders issued a commitment to stop supplying SBA areas with goods imported through IRG-controlled ports. Moreover, in May, the SBA prevented the entry of locally produced cooking gas sourced from Safer in Marib and Al-Jawf governorates, substituting it with imported gas. These efforts to redirect imports, ongoing since early 2023, have worsened the IRG’s financial problems, as the IRG is losing revenue through customs and taxes, which typically provide its second most important source of revenue after oil exports. This comes on top of the significant loss of revenue that the IRG has incurred due to the SBA’s blockade of oil exports from IRG-controlled seaports using the threat of drone strikes, ongoing since October 2022. Despite declining IRG revenue, the Aden-based Central Bank of Yemen (CBY) has been able to continue holding weekly foreign currency auctions, largely due to financial support from the International Monetary Fund (IMF). In November 2022, the IMF agreed to grant Yemen 300 million USD of Special Drawing Rights (SDR), the second batch of which the CBY was able to monetize on June 17. While the ongoing auctions have supported the market's needs for hard currency used in the process of importation, the Aden-based rial has continued to depreciate. According to data from FAO, the Aden-based rial depreciated by 6 percent between May and June, on average, reaching 1,351 YER/USD. This represents a 24 percent loss in value compared to the same time last year.

Meanwhile, the value of the Sana’a-based rial remained relatively stable in June. This is a continuation of a longer-term pattern of stability, attributable to the fact that the SBA follows a monetary control system, which is a fixed exchange rate system in which the SBA, through the “Payments Committee,” is the only legal buyer and seller of foreign currency. Meanwhile, the IRG, including the Aden-based CBY, follow a floating exchange rate system. Given the controlled and comparatively limited availability of foreign currency in SBA areas, traders are incentivized to procure hard currency from IRG-controlled areas, resulting in high demand in Aden and contributing to the depreciation of the local currency. Additionally, exchange shops in IRG-controlled areas have illegally replaced the bank authorities and lack regulation. At the same time, the SBA has been able to fairly successfully enforce its long-standing ban on newly printed rial bank notes, despite the poor physical condition of the old notes, helping to sustain the value of the local currency due to comparatively limited supply. Overall, the availability of fuel for consumers remains stable nationwide, despite a decline in fuel import levels through IRG-controlled areas in 2023 to date. From January to May 2023, a total of 583,000 tons of fuel were imported through Aden and Mukalla seaports (in IRG-controlled areas). With almost half of 2023 elapsed, this amount of fuel is less than one-third of the total imported throughout all of 2022, according to WFP reporting. 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 May 2023, official prices¹ of petrol were 38 percent lower than last year on average across IRG areas, but still 49 percent higher than the four-year average, while official prices of diesel were similar to last year but double 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 156,000 tons of fuel discharged between May 3 and 23. On June 15, the Sana’a branch of the Yemen Petroleum Company (YPC) announced that official fuel prices would lowered yet again in SBA-controlled areas, effective June 16, alongside lower global prices. The new official prices were set at 450 YER for one liter of petrol, down from 475 YER, and 450 YER for one liter of diesel, down from 500 YER. As of June 2023, official petrol prices according to FAO data were 28 percent lower than last year on average across SBA areas, but 8 percent higher than the four-year average, while official diesel prices were 30 percent lower than the previous year but 6 percent higher than the four-year average.

From January to May 2023, a total of 2,269,205 MT of basic food commodities were imported through all of Yemen’s major sea and land ports, 67 percent of which were wheat grains. Food import levels have slightly declined in recent months in both IRG and SBA areas but remain within normal ranges (Figure 2). Despite SBA authorities pressuring traders, the overall share of basic food commodities imported through SBA-controlled ports has not meaningfully shifted to date. However, there has been a shift in the share of cooking oil being imported through SBA-controlled ports; after the SBA blocked imports of cooking oil (largely locally produced in IRG-controlled areas) via land borders, the amount of cooking oil being imported through IRG-controlled ports has decreased, likely due to increased supply of locally produced cooking oil, while the amount of cooking oil being imported through SBA-controlled ports has increased, as traders are reportedly importing more cooking oil from Iran.

Staple food prices remained generally stable in May 2023 in both IRG and SBA reference markets, according to FAO data. In the SBA reference market of Amanat al Asimah (Sana’a city), the monthly average cost of the minimum food basket (MFB) remained stable in May and lower by 26 percent compared to the same time in the previous year, mainly due to declining global prices, reduced transportation costs given declining fuel prices, and price controls enforced by the local authorities. However, the cost of the MFB remained higher by 208 percent compared to the pre-crisis period (February 2015). Similarly, the monthly average cost of the MFB in the IRG reference market of Aden market remained stable in May but was 8 percent higher than in May 2022 and 608 percent higher compared to the pre-crisis era (February 2015). High staple food prices in Aden are being driven primarily by the depreciation of the Aden-based rial against the USD, which is making imports more expensive despite declining global food prices.

According to FAO data, casual (unskilled) labor wage rates remained stable from May to June in most governorates. On average across SBA areas, casual labor wage rates in June 2023 were similar to the same time last year (3 percent higher) (Figure 3) and 23 percent higher than the four-year average. Meanwhile, on average across IRG areas, casual labor wage rates were 24 percent higher than last year and 68 percent higher than the four-year average. Given trends in staple food prices and wages, purchasing power for casual laborers as measured by the terms of trade² between wage rates and the cost of the MFB was 11 percent better than the same time last year, on average across IRG-controlled areas in June 2023, driven by rising wage rates (alongside a slowed rate of food price increases). Meanwhile, on average across SBA-controlled areas, purchasing power for casual laborers was 20 percent better than last year, driven by declining food prices. It should be noted, however, that significant variability exists across governorates in both IRG and SBA-controlled areas, with some areas witnessing declining terms of trade.

Lower levels of conflict, stable fuel availability, and declining fuel prices have contributed to a slight improvement in the overall business environment in SBA-controlled areas, driving a slight improvement in availability for casual labor opportunities alongside the improved terms of trade. However, the overall high costs of business inputs and services continue to limit income-earning opportunities for business owners, laborers, and petty traders. Additionally, in IRG-controlled areas, the availability of casual labor opportunities has not improved due to overall deteriorating economic conditions. Meanwhile, government salary and pension payments remain unadjusted for inflation, particularly impacting households in IRG areas. Though some households reportedly received government salary and pension payments in June 2023 prior to Eid, payments remain irregular overall in most SBA areas. Additionally, income from foreign remittances is expected to be lower than 2022 levels given the decline in the number of Yemeni immigrants in the Kingdom of Saudi Arabia (KSA). In May, the KSA decided to send around 500,000 Yemeni workers back to Yemen.

Cumulative rainfall during Yemen’s first rainy season (March to May 2023) was above average across most of the country, with surpluses 100-200 mm or more recorded in southwestern portions of the country (Figure 4). While above-average rainfall was beneficial to agricultural activities – particularly in lowland irrigated areas and across most rainfed highland areas – episodic heavy rainfall led to damaging floods in disparate parts of the country. During the last week of May, incidents of flooding were widely reported, causing, among other things, damage to dams, irrigation infrastructure, and homes, as well as fatalities.

Though the rainy season typically ends in May, rainfall continued into mid-June in localized highland areas in the south and west, according to FAO reporting, causing flooding in wadi Bana in Abyan. Despite high soil moisture levels in May/June, desert locust activity remained absent owing to below-average maximum temperatures, especially across typical breeding areas in the western portion of Yemen.

According to data from FAO, agricultural labor wage rates declined slightly from May June, by 4 percent on average across IRG areas and by 6 percent on average across SBA areas, though with variability across governorates. This is likely attributable to seasonally declining demand for agricultural labor in June as spring cereal harvesting and the peak of the lowlands’ fruit and vegetable cultivation season concluded in May in most areas. In June 2023, agricultural labor wage rates in IRG areas averaged 24 percent higher than the same time last year and 74 percent higher than the four-year average. Meanwhile, in SBA areas, agricultural labor wage rates were similar to last year and 23 percent higher than the four-year average. Given trends in staple food prices and wage rates, purchasing power for agricultural laborers as measured by the terms of trade between wage rates and the cost of the MFB was 12 percent better than the same time last year, on average across IRG-controlled areas in June 2023. Meanwhile, on average across SBA-controlled areas, purchasing power for agricultural laborers was 16 percent better than last year. Similar to the trends in terms of trade observed for casual laborers, improved terms of trade for agricultural laborers compared to last year are primarily being driven by declining food prices in SBA areas and by rising wage rates in IRG areas (alongside a slowed rate of food price increases). However, significant variability exists across governorates.

Good rainfall during the first rainy season and reduced fuel prices have supported the agricultural sector in Yemen, driving an increase in opportunities for agricultural labor relative to last year. However, farmers continue to face overall high input costs, limiting production capacity. Additionally, in many areas impacted by direct conflict the risk of landmines continues to impede movement and reduce access to agricultural land. Overall, however, increased demand for agricultural labor is expected to be supporting slightly improved access to income for many poor households.

It should be emphasized that averages showing improved purchasing power across IRG and SBA controlled areas mask governorate-to-governorate variation. For example, in June 2023, agricultural and casual laborers in Amran governorate were experiencing terms of trade between wage rates and staple wheat flour prices that were 47 percent lower and 29 percent lower, respectively, than last year. Additionally, despite some improvements in availability of labor opportunities, demand for labor remains very limited overall, with high competition for available opportunities. Based on data gathered from key informants, most laborers are unlikely to be able to work for more than an estimated five to ten full days per month and, at prevailing wage rates and prices in May, even 10 full days of work was insufficient for agricultural casual laborers to cover the full cost of the MFB in many governorates, with Al Dhale’e, Al Jawf, and Marib recording the lowest purchasing power for laborers. Though some households have additional sources of income, it is common for poor households to have only one primary source of income, often daily wage labor.

The abundance of rainfall in the first rainy season has led to an improvement in vegetation conditions across most of the country, particularly in western highland areas (Figure 5). This seasonal availability of natural fodder is reducing households’ reliance on purchasing fodder from markets. As of May 2023, prices of concentrated animal feed were similar to the same time last year, on average at the national level, after increasing by 15 percent since January 2023. Despite the availability of natural fodder supporting livestock productivity, lack of availability of veterinary care perpetuates the spread of animal diseases and pests, which are the main cause of livestock fatalities across Yemen. Meanwhile, Tehama and coastal areas are currently largely dependent on purchased feed, given scarce pasture.

Livestock prices generally remain above average and have remained at seasonally high levels since Ramadan in April, with the advent of the Eid al-Adha holiday in June maintaining high seasonal demand and prices. In May 2023, prices of live goats and sheep (12 kg) were 22 percent higher and 27 percent higher than the same time last year, respectively, on average at the national level, according to data from FAO. While some households have likely benefited from the sale of livestock at near-record high prices, other poor pastoralist households have likely been unable to benefit due to declining livestock ownership over the years.

Humanitarian assistance funding shortages since the second quarter of 2020 persist as of the first half of 2023. As of June, the Yemen Humanitarian Response Plan (YHRP) for 2023 had only met 28 percent of the total required 2.2 billion USD for food security and agriculture interventions, including emergency food assistance. In response to declining funding, WFP has reduced the provision of emergency food assistance – affecting both distribution frequency and ration size – at several points in time over the last three years (Figure 6).

Most recently, in 2023, WFP further reduced distribution frequency, from one distribution approximately every six weeks to one distribution approximately every eight weeks. The ration size of each distribution is expected to be equivalent to around 65 percent of a households’ minimum energy needs for a one-month period. As such, the total contribution of assistance to households’ food needs is around one third of households’ total minimum energy needs, a notable decline from the 80 percent that households were receiving through the end of 2021. Additionally, many beneficiary households are expected to be sharing assistance rations and are therefore likely meeting an even lower share of their total food needs from assistance.

In May 2023, WFP reporting assisting 10,115,671 million people with general food assistance (GFA) as part of distribution cycles 1, 2, and 3 of 2023, 86 percent of whom were located in SBA-controlled areas. Of the total assisted across the country in May, the vast majority (10,012,282) received in-kind food assistance while 103,389 were assisted with cash-based transfers. According to key informants, beneficiaries who typically receive cash transfers – particularly in Aden and Lahj – have been experiencing increased delays and disruptions to assistance distributions.

Current Food Security Outcomes

In rural areas, the peak fruit and vegetable production season in the lowlands and the bulk of spring cereal harvesting across the country have recently concluded. As such, many poor households are currently expected to be benefiting from what remains of their slight seasonal increase in access to food from own crop production and income from labor opportunities across the production and marketing chains. Additionally, households in many SBA-controlled areas are expected to be benefiting from lower food prices and improved purchasing power compared to last year, alongside slightly improved opportunities for income-earning due to the reduction in conflict. On the other hand, poor households in IRG-controlled areas have likely not experienced meaningful improvement in income-earning opportunities (except in some previously conflict-affected frontline areas) due to deteriorating macroeconomic conditions alongside worsening shortages of government revenue, recent trade disruptions, and depreciation of the currency.

Across the country, reductions in assistance benefits have increased beneficiary households’ dependence on markets. As such, the slight improvements in income-earning and purchasing power have likely allowed many households to just barely compensate for the reductions in assistance, rather than facilitating improvement in food consumption.

Overall, across the country, opportunities for income-earning remain severely constrained due to the lasting impacts of years of protracted conflict on livelihoods and the economy. Furthermore, despite recent improvements, purchasing power remains significantly below pre-conflict levels. Given this and the highly eroded coping capacity that Yemeni households face – including low asset ownership and limited opportunities to purchase food on credit, millions of poor households are still expected to be facing food consumption gaps and Crisis (IPC Phase 3) or worse outcomes across the country, though this number is expected to have reduced slightly in June due to the seasonal improvements in rural areas and a slight reduction in the number of households facing consumption gaps in SBA-controlled areas in in rural areas nationwide. On the other hand, the number of households facing Crisis (IPC Phase 3) or worse outcomes has likely increased in IRG-controlled areas, particularly in areas that typically receive the cash transfer modality of assistance benefits (Aden and Lahj) due to delays in assistance distributions. At the area-level, Crisis (IPC Phase 3) and Crisis! (IPC Phase 3!) outcomes are widespread. Due primarily to reductions in conflict and the favorable first rainy season, Crisis! (IPC Phase 3!) rather than Emergency (IPC Phase 4) outcomes are now expected to be present in Marib. However, across the country, worst-affected households – including those who previously depended on humanitarian assistance as their primary source of food and income – are expected to be facing Emergency (IPC Phase 4) or worse outcomes.

Assumptions

The most likely scenario from June 2023 to January 2024 is based on the following national-level assumptions:

• Talks between SBA leaders and Saudi officials will likely continue throughout the projection period. A renewal of the official truce is unlikely given the slow pace of talks, concerns over demands seen as unpalatable (including the payment of civil servant salaries by the IRG in SBA areas), and continued lack of trust between parties. However, the unofficial state of truce is likely to continue alongside ongoing talks, with re-escalation of fighting to pre-truce levels unlikely.
• Ground fighting will likely remain near current relatively low levels, primarily affecting the main frontline areas in Taizz, Al Dhale’e, Hajjah, Lahj, and Marib. The number of incidents of shelling and drone strikes is also expected to remain similar to relatively low levels of recent months, primarily affecting Taizz, Marib, Al Dhale’e, Al Hudaydah, Shabwah, and Al Bayda.
• Access restrictions, due to both insecurity in frontline areas and bureaucratic requirements imposed by authorities at checkpoints between IRG and SBA areas, are expected to continue to impede or prevent travel along many key trade routes.
• The SBA is likely to continue threatening oil export infrastructure in areas under IRG control. Oil production and exports by the IRG are expected to remain halted.
• Due to reduced oil production, it is likely that the severity of power outages will increase in IRG urban centers alongside increasing demand for electricity during the summer period, with peak demand expected in September. The severity of power outages will likely be similar to or worse than during the same time period of last year. This is expected to increase civil unrest, although not to the high levels observed in 2021 given the comparatively stronger position of the Southern Transitional Council (STC).
• Funding shortages are likely to persist during the outlook period, and the provision of emergency humanitarian food assistance is likely to remain similar to current levels, with beneficiaries reached with approximately 65 percent rations once every approximately eight weeks. However, uncertainty exists given the lack of available distribution plans, and further reductions in ration size or distribution frequency are possible, with cash transfer beneficiaries (mainly in IRG areas) most vulnerable, given that the cash pipeline is more likely to experience breaks due to lack of funding.
• Given ongoing competition for imports, the SBA is expected to continue to block the internal movement of food and non-food goods from IRG to SBA areas via land borders.
• Overall, staple food import levels are expected to remain stable at the national level. It is likely that an increasing share of some staple food commodities will enter through SBA-controlled ports given the pressure that SBA authorities are exerting on traders.
• Following the recent easing of importation requirements through the SBA-controlled Red Sea ports and, more recently, the SBA blockade of imports from IRG areas via land borders, some further shifts are likely in importation supply chains of non-food, non-fuel commodities (such as construction materials, textiles, and electronics). Overall, the impacts on supply and prices of specific commodities remain highly uncertain. However, commodities that are locally produced in IRG areas are less likely to be rerouted to SBA areas via sea due to the high transportation costs that would be associated with this. Prices of some such commodities (such as cement, produced in IRG areas) are likely to decline in IRG areas due to increased supply (similar to what has occurred with cooking gas and locally produced cooking oil) and increase in SBA areas. Meanwhile, although traders in SBA areas may adapt by instead importing commodities from other regional trading partners, such supply chain adjustments may take time.
• Given the high and increasing need, foreign actors such as the KSA and UAE are likely to pledge some additional final support to support the economy in IRG-controlled areas. However, given past trends, the CBY of Aden is not expected to access the full amount of pledged funds, and the financial support accessed is unlikely to meet the high needs.
• Given expectations for reduced oil production and exports, IRG revenue and foreign exchange inflows are likely to remain near current reduced levels and significantly below pre-crisis levels. As a result, the Aden-based CBY is likely to continue to face currency shortages, and disruptions to conducting foreign currency auctions are anticipated during the projection period (including reductions in auction frequency or the amount of foreign currency offered per auction).
• In IRG areas, economic conditions are expected to further deteriorate given low government revenue and foreign exchange earnings associated with oil exports as well as the loss of tax revenue associated with exports to SBA areas via land borders. In SBA areas, economic conditions are expected to slightly improve due to expectations for increased imports through the Red Sea ports as well as reduced fuel prices. This will likely support some improvement in job opportunities, particularly around the ports.
• In SBA areas, wage rates for agricultural and casual laborers are expected to remain generally stable, on average. Given this and expectations for stable food prices, terms of trade for laborers in SBA areas will remain generally stable on average. In IRG areas, wage rates are likely to continue to increase due to inflation. Given this and expectations for rising food prices, terms of trade for laborers in IRG areas will likely remain generally stable on average. However, across the country, there will continue to be substantial localized variability. For instance, some IRG areas will likely witness stable (rather than increasing) casual labor wage rates due to low demand for labor and, consequently, declining terms of trade given this and rising food prices.
• Delays and non-payment of government salaries and pensions are expected to continue in SBA areas and worsen in IRG areas, with military and security forces and pensioners likely to be among the worst affected.
• The Aden-based rial is expected to depreciate against the USD throughout the scenario period, likely surpassing 1,400 YER/USD, due to severe and worsening foreign exchange shortages and increased demand for hard currency by pilgrims during Haj season. The Sana’a-based rial is expected to remain stable at around 530 to 550 YER/USD due to the SBA’s strict control over the exchange rate market and relatively better access to foreign exchange via trade.
• Fuel imports through Red Sea ports are expected to continue at levels similar to last year, with less time spent in holding areas and overall reduced importation costs, given eased restrictions. Fuel is expected to remain generally available at official and commercial stations in both IRG- and SBA-controlled areas.
• 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 currency depreciation. Meanwhile, in SBA-controlled areas, given improved fuel availability, fuel prices are expected to remain relatively similar to current reduced levels.
• Given expectations for currency depreciation and rising fuel prices, staple food prices are expected to increase further in IRG-controlled areas. According to FEWS NET price projections,³ prices of staple wheat flour (imported) in the IRG reference market of Aden are expected to increase overall throughout the projection period, reaching levels above 1,000 YER/kg by January 2024.
• In SBA-controlled areas, staple food prices are expected to remain generally stable at levels lower than last year due to lower fuel prices, a stable exchange rate, recent agreements facilitating imports through Red Sea ports, and price controls by the authorities. According to FEWS NET price projections, prices of staple wheat flour (imported) in the SBA reference market of Amanat al Asimah are expected to remain near current levels of 350 to 400 YER/kg.
• Given increasingly restrictive labor policies in the KSA and persistent economic challenges in the UK and USA, income from foreign remittances is expected to remain similar to current reduced levels and below the five-year-average.
• Income from domestic remittances is expected to be generally similar to last year but below the five-year average, although households in SBA areas who receive remittances from IRG areas are likely to receive slightly less income from remittances due to expected currency depreciation, which increases transfer fees.
• Cumulative rainfall during Yemen’s second rainy season from July to October is forecast to be average. Given this, the risk of flooding is expected to be average, with western lowland areas most at risk.
• Prevalence of water- and vector-borne diseases such as malaria and dengue is expected to follow typical seasonal trends, peaking in the winter in December/January. Risk is also expected to be elevated in association with any flooding during Yemen’s July to September second rainy season and in areas where active conflict threatens infrastructure linked to water and sanitation.
• Overall, cereal crop production in 2023 is expected to be slightly better than last year, with positive impacts of favorable rainfall during the growing season counteracting negative impacts of heavy rainfall and flooding that reduced planting in localized highland areas (particularly the northern highlands). Vegetable crop production is expected to be better than last year due to the plentiful rainfall. Fruit production is expected to be similar to last year and slightly worse than two years ago, given the impact of last year’s floods (such as in Sana’a, where fruit trees were severely damaged).
• Given lower fuel prices, income earned from crop sales is expected to improve slightly compared to last year due to reduced production and transportation costs which will allow for better marketing opportunities. Income-earning opportunities along the marketing chains across the country are also likely to increase slightly. However, income-earning from these sources will remain below pre-conflict levels.
• In the October to January period, availability of locally produced cereals will increase across the country during the main harvest season. Rural households in highland areas will harvest sorghum, maize, wheat, and barley beginning around September, while households on the Red Sea and Tihama Plain will harvest sorghum and millet in mid-November. In general, most households’ access to cereals from their own production is likely to be sufficient for two to three months.
• The main fruit and vegetable production season in the highlands from September to January is expected to provide increased access to income from labor opportunities along the production and marketing chains. In lowland areas, access to income from labor opportunities will remain low overall in July/August along with the local agricultural off-season before increasing again between December and January with the harvest of cereals and the onset of the fruit and vegetable production season.
• Vegetation and pasture conditions are anticipated to decline slightly in July following drier weather, and then improve seasonally in August and September/October after the start of the second rainy season. While pasture conditions have improved due to recent floods, the presence of landmines is expected to restrict access to pastures and increase the risk of livestock lost among those who do take their livestock for grazing.
• Livestock body conditions and productivity will likely improve during the projection period, especially in highlands and eastern areas, given seasonal fodder and pasture availability. This will likely support access to food and income from livestock production and sales.
• Income from livestock sales will likely increase as is typical during Eid al-Adha in June due to seasonally high demand and prices, and then decline after Eid due to low demand. In lowland areas, the lack of available pasture and high fodder prices from June to July will likely drive poor pastoralist households to sell their livestock at lower prices to cover production costs. Overall, livestock prices are expected to remain higher than average, especially in IRG-controlled areas due to depreciation of the Aden-based rial.
• Harvesting of qat is expected year-round in higher elevation areas, with seasonally high production in the summer. Qat production is expected to be near five-year average levels given the priority use of irrigation water for this valuable cash crop, providing households with income from qat sales and labor opportunities along the production and marketing chains.
• Income earning from fishing activities in the Red Sea is expected to improve seasonally in the July to October period before declining again with the start of the windy season from November to February. Meanwhile, income from fishing in the Arabian Sea is expected to decrease from July to September due to the windy season—with Socotra highly impacted—before improving seasonally from October to January. Overall, income from fishing will likely remain below pre-conflict levels due to persistent factors that still impact the fishery sector, including above-average fuel prices, conflict-related access constraints, and the lack of a cold chain, especially in IRG-controlled areas during the summer season, where there are long periods of electricity outages.

Most Likely Acute Food Security Outcomes

In the June to September period, rural households will face seasonally low levels of access to food and income. In the October 2023 to January 2024 period, seasonal availability of food and income is expected to increase alongside the main cereal harvest across the country and the main fruit (especially citrus) production season in the highlands. Crop production is generally expected to be favorable and better than last year, supported by average rainfall in Yemen’s second rainy season (July to September). Additionally, agricultural activities in SBA-controlled areas will likely continue to benefit from lower fuel prices.

Over the course of the projection period through January 2024, households in SBA-controlled areas will likely benefit from gradual improvement in income-earning opportunities due to the sustained reduced levels of conflict and lower fuel prices. On the other hand, households in IRG-controlled areas will likely face further gradual reduction in opportunities for income-earning due to deterioration in economic conditions.

Overall, Crisis (IPC Phase 3) and Crisis! (IPC Phase 3!) outcomes are expected to persist across the country throughout the projection period, with worst-affected households facing Emergency (IPC Phase 4) or worse outcomes, as millions of Yemenis will continue to struggle with below-average income-earning opportunities, above-average prices, and reduced humanitarian assistance. At the national level, the number of households facing Crisis (IPC Phase 3) or worse outcomes is anticipated to increase slightly in the June to September period alongside seasonally low availability of food and income, before declining slightly again in the October to January period alongside the main harvest season. Meanwhile, in SBA-controlled areas, the number of households facing food consumption gaps and Crisis (IPC Phase 3) or worse outcomes is expected to decline slightly overall throughout the projection period given anticipated gradual improvement in income-earning opportunities. Meanwhile, in IRG-controlled areas, the number of households facing food consumption gaps and Crisis (IPC Phase 3) or worse outcomes in expected to increase overall throughout the projection period, driven by declining opportunities for income-earning and rising prices. However, these shifts will be relatively slight compared to the total size of the population facing food consumption gaps and Crisis (IPC Phase 3) or worse outcomes.

Background

Lahj governorate is located in southwestern Yemen, with a total population of an estimated 1.15 million people. The governorate is characterized by diverse topography, ranging from mountainous areas in the northeast, northwest, and western areas to coastal areas in the southwest. Across all livelihood zones of in the governorate, crop production is a key economic activity, with key crops including cereals, pulses, mangoes, and bananas in the higher-elevation areas. Livestock is reared across all livelihood zones, and fishing is predominant in the southwestern coastal areas. Quarrying and clay-making are additional income-earning activities among poor households. Humanitarian assistance and remittances have also become important sources of food and income for poor and very poor households.

Lahj is one of the poorest governorates in Yemen and, as such, high levels of chronic food insecurity exist. According to a pre-war Household Budget Survey conducted in 2014 as reported by the Berghof Foundation, the poverty rate in Lahj governorate was estimated at 69 percent. Daily wage laborers are among the poorest households in the governorate, followed by government employees who receive irregular salary payments. These households are overwhelmingly dependent on highly variable off-farm sources of income to meet their needs, as they purchase the vast majority of their food from markets. According to a Food Security and Livelihoods Assessment (FSLA) conducted by WFP, FAO, and partners in November 2022, 21 percent of surveyed households reported that casual wage labor/irregular salaries provided their primary source of income. On average, households also reported that most of their total food in the past month came from purchases on cash or credit (Figure 7).

Current Situation

The security situation in Lahj governorate has deteriorated progressively in 2023. According to data from ACLED, the frequency of conflict incidents in the second quarter of 2023 was higher than in the same time period of 2022, particularly in Tub Al Bahah, Yahar, Al Had, Yafa’a, Al Qabbaytah, Al Musaymir, and Al Maqatirah districts. SBA forces have continued targeting Al Musaymir, Al Qabbayth, Al Maqatirah, and Tur Al Bahah districts, rendering portions of roads inaccessible along key supply routes connecting the south and north of the country. In frontline districts (mainly Al Musaymir, Al Qabbayth, Al Maqatirah, and Tur Al Bahah), conflict is also reducing availability of casual labor opportunities, constraining access to crop fields and markets, and disrupting the distribution of humanitarian assistance.

According to data from FAO, the retail cost of the monthly MFB averaged 126,211 YER across the governorate in May 2023. This is around 10 percent higher than the same time one year ago. Prices of staple wheat flour (imported) increased by about 6 percent from April to May, reaching 917 YER/kg, similar to last year (2 percent higher). As in other IRG-controlled areas, rising food prices are mainly attributed to the continued depreciation of the local currency. Across the governorate, prices of most imported food commodities tend to be higher in rural markets due to additional transportation costs. For example, prices of staple wheat flour in the Laboos market of Yafa’a district were roughly 40 percent higher in April 2023 than the governorate average.

Fuel prices in Lahj typically follow the same trends as in other IRG-controlled areas, being influenced mainly by global fuel prices and the value of the local currency. Due largely to declining global prices, fuel prices in Lahj are lower than at the same time last year but still elevated overall. In May 2023, prices of both official and unofficial petrol remained stable at levels lower than last year by 10 percent and 27 percent, respectively, according to data from FAO. However, prices of official and unofficial petrol remained higher than the four-year average by 61 and 60 percent, respectively. As such, while households whose livelihoods depend on fuel – such as in the agriculture or transportation sectors – have experienced some relief relative to last year’s peak prices, they still face significantly above-average prices.

The poorest households in Lahj depend heavily on casual wage labor as a primary source of income. In May 2023, wage rates for casual labor declined by 8 percent compared to the prior month, reaching levels around 20 percent lower than at the same time last year, according to data from FAO. This decline in wage rates compared to last year, despite inflation, is likely due to the deteriorating economic conditions that are limiting demand for labor. Given rising food prices and declining wage rages, purchasing power for casual laborers as measured by the terms of trade between wage rates and wheat flour prices decreased notably from April to May 2023, reaching levels a full 40 percent lower than at the same time last year. Furthermore, high competition for limited casual labor opportunities continues to restrict poor households’ ability to earn enough income from casual labor.

Above-average rainfall during the March to May season generally supported crop production in the lowlands along the Tuban delta while aiding sorghum, barley, and wheat planting in the highlands. However, above-average fuel prices limited mechanized farming in several areas, including Al Had District. Farmers were mostly reliant on time-intensive draft power for ploughing. Given this and above-average input prices, a decrease in cultivated area is expected. While agricultural labor wage rates in May 2023 were recorded at levels 43 percent higher than the same time last year, driving terms of trade that were 9 percent higher, this trend is likely being driven by high demand for labor and wage rates in rural highland markets.

Other sources of income include remittances, livestock production, and fishing. For example, 30 percent of poor households in Yafa’a and Al Maflahy depended on cash transfers from better-off households locally and internationally. Livestock was increasingly a minor source of income during the current period, as livestock herds have been decimated by years of conflict and higher-than-normal sales to mitigate wide income and food consumption gaps. Income from fish sales in coastal areas, including Al Madaribah Al Arah, declined during the analysis period due to increased insecurity in the western coastal areas, high fuel prices, and the onset of the high wind season.

Given rising food prices and declining purchasing power, poor households – especially those dependent on casual labor – are likely increasingly struggling to meet their needs from market purchases and face high levels of debt. According to the FSLA conducted in November 2022, food purchased on credit provided a significant share of households’ total food. However, a significant share of households also reported being unable to take on additional debt (Figure 8), particularly in Habil Jabr, Al Had Yafi’a, and Al Maqatirah.

In Lahj, a large share of the population has historically been targeted for humanitarian food assistance. In 2021, FSAC data indicated that more than 60 percent of the governorate’s population was being reached with assistance monthly. More recently, from March to May 2023, 37 percent of the population was reached monthly, on average. This reduction is mainly due to the fact that not all beneficiaries are reached each month given the reduced distribution frequency of assistance. Most humanitarian assistance in Lahj is provided in the form of cash transfers, though households in Al Qabbaytah receive in-kind food assistance.

Currently, WFP and partners are expected to be delivering humanitarian assistance to beneficiaries approximately once every eight weeks or with even less frequency, based on reports from key informants that beneficiaries of cash transfers are experiencing additional delays. As is the case nationally, each distribution is expected to provide rations equivalent to around 65 percent of households’ minimum caloric needs for a one-month period. As such, on average, humanitarian assistance is expected to be providing around one-third of households’ total minimum monthly needs, prior to any sharing with non-beneficiary households. According to the 2022 FSLA, humanitarian assistance was reported as a primary source of food or income by at least 25 percent of households in Halmin, Radfan, Al Malah, Al Musaymir, Al Qubaytah, Tur Al Bahah, Al Maqatirah, and Al Madaribah districts.

Overall, many poor households have likely been unable to compensate for recent ration reductions given rising prices, declining terms of trade, and the inability to take on more debt. Currently in June, seasonal availability of food and income is also beginning to decline. Many poor households have been experiencing highly limited opportunities for income-earning for a protracted period of time and have limited remaining coping capacity. Many poor households are expected to be facing Crisis (IPC Phase 3), Crisis! (IPC Phase 3!), or worse outcomes, with Crisis! (IPC Phase 3!) outcomes likely at the area level.

While no recent nutrition surveys have been conducted, the most recent SMART survey conducted in November/December 2021 found that the prevalence of global acute malnutrition (GAM) among children under five as measured by weight-for-height z-score was 14.3 percent across lowland areas, on average, and 6.2 percent across highland areas, on average. These are considered “Serious” and “Alert” levels, respectively, according to IPC thresholds. The current prevalence of GAM is likely similar to or higher than these 2021 levels due to higher food and fuel prices, reduced availability of labor opportunities, and reductions in humanitarian food assistance.

Assumptions

In addition to the national-level assumptions, the following assumptions apply to this area of concern:

• Conflict will likely continue near current levels, with frontline districts (mainly Al Musaymir, Al Qabbayth, Al Maqatirah, and Tur Al Bahah) worst affected.
• Economic conditions will likely continue to deteriorate.
• Staple food prices are expected to follow similar trends as in other IRG-controlled areas, increasing overall due to depreciation of the currency.
• Opportunities for agricultural labor will decline to seasonally low levels during the agricultural off-season from June to September. Availability of agricultural labor opportunities will then increase seasonally from October to January during the main harvest period.
• Opportunities for casual labor will likely remain close to current low levels throughout the projection period.
• Labor wage rates are generally expected to remain stable, leading to declining terms of trade.
• Income from crop sales is likely to increase in the October to January period due to increased income from the cereal and vegetables harvest.

Most Likely Food Security Outcomes

In the June to September period, an increasing number of poor households will likely face food consumption gaps and Crisis (IPC Phase 3) or worse outcomes given declining seasonal availability of food and income during the agricultural off season. At the same time, rising prices will further constrain households’ ability to purchase food from markets. Worst-affected poor households will likely resort to severe coping strategies, including begging and distressed sales of remaining small livestock. In the October to January period, some households will experience seasonal increases in access to food and income, with a slight reduction in the number of households facing food consumption gaps and Crisis (IPC Phase 3) or worse outcomes likely during this time. Throughout the projection period, Crisis! (IPC Phase 3!) outcomes are expected to persist at the area level. Despite assistance reductions, a large share of the population will continue to receive some assistance, mitigating deterioration to even more severe outcomes.

Current Situation

Above-average rainfall in the March to May 2023 first rainy season benefited the agricultural sector in Sana’a by reducing reliance on irrigation. Lower fuel prices also increased farmers’ purchasing power and profits. This is expected to have benefited poor households who earn income from agricultural labor. However, flooding also caused damage to crops in July/August 2022 and again in March/April 2023. In 2022, many farmers of grapes—an important cash grop in the governorate—lost vines. Overall, however, opportunities for agricultural labor are expected to have been better than last year. The recent cereal harvest is also expected to have provided some access to food from own crop production, though most poor households are landless or have limited land holdings.

According to data from FAO, staple food prices declined slightly from April to May but remain higher than last year and significantly above average. In May 2023, the average price of staple wheat flour was 475 YER, a 5 percent decline from the previous month but 19 percent higher than at the same time last year and 40 percent higher than the four-year average. The cost of the minimum food basket in May 2023 averaged 52,583 YER, a 5 percent decline from the prior month but 12 percent higher than at the same time last year. This slight decline follows a period of peak prices from January to April 2023, when wheat flour prices were at record levels of 500 YER/kg. Since then, the favorable spring cereal harvest and declining fuel prices have likely exerted downward pressure on prices. In general, food prices tend to be higher in rural markets farther away from Amanat Al Asimah (located in the center of Sana’a governorate) due to higher transportation costs.

Poor households typically depend on daily wage labor as an important source of income. Likely at least partially due to the favorable agricultural season, wage rates for agricultural labor have been higher in 2023 than in 2022. As of May 2023, wage rates for agricultural laborers were on average 17 percent higher across the governorate compared to the same time last year, according to FAO data. Agricultural labor wages were also 17 percent higher than the four-year average for May. Meanwhile, wage rates for casual laborers were 8 percent higher than last year and 25 percent above the four-year average.

From April to May 2023, the terms of trade (a proxy measure for purchasing power) between staple wheat flour prices and wage rates improved by 5 percent for both agricultural and casual laborers, driven by stable wages and declining wheat flour prices. As of May 2023, the terms of trade for agricultural laborers were 22 percent higher than last year. Meanwhile, the terms of trade for casual laborers in May 2023 were 12 percent higher than the same time last year. In addition to improved terms of trade, the availability of labor opportunities has likely increased slightly, driven by slight economic improvement alongside reduced conflict, improved fuel availability and prices, and the favorable rainy season.

Across Sana’a governorate, approximately 21 percent of the population was reached monthly with humanitarian assistance in the March to May period, on average. However, as in other areas of the country, assistance provision has been scaled down since 2022. Currently, beneficiaries receive assistance distributions approximately once every eight weeks, with each distribution providing enough in-kind food for households to meet roughly 65 percent of one month’s minimum energy requirements. This means that assistance is providing an average of around one third of households’ total minimum energy needs, though sharing and mistargeting result in households meeting an even lower share of their total minimum food needs from assistance. Given this, beneficiaries of humanitarian food assistance have likely experienced increased dependence on markets for food in the past year and a half, though humanitarian assistance is still providing important support to poor households.

According to WFP reporting, the prevalence of inadequate food consumption decreased slightly during the holy month of Ramadan in April, as is typical for that time of year, mainly due to social solidarity and support from communities and charity organizations. Despite improvement in other SBA-controlled areas (likely attributable to declining food prices), the proportion of households reporting inadequate food consumption in Sana’a in April 2023 remained similar to the same time last year. The 2023 Humanitarian Needs Overview for Yemen has also identified relatively high needs in Sana’a, including in urban areas hosting displaced households.

Amid reductions in humanitarian assistance, many poor households are struggling to meet their needs, given high dependence on markets for food. Despite slightly declining prices and slightly improving terms of trade in recent months, food prices remain higher than last year and significantly above average, while income-earning opportunities remain significanly below pre-conflict levels and are furthermore near seasonally low levels in June. Given limited opportunities to expand income-earning and eroded coping capacity after years of protracted conflict and poor economic conditions, many poor households are expected to be facing food consumption gaps. Crisis (IPC Phase 3) outcomes are likely at the area level.

Assumptions

• Given forecast average rainfall during Yemen’s July to September second rainy season, availability of agricultural labor opportunities will likely be normal, with seasonally high demand for labor associated with the peak fruit harvest season from mid-August to December as well as the main cereal harvest in October/November. Agricultural labor wage rates are expected to remain generally stable throughout the projection period.
• The main cereal harvest in October/November will likely be normal to slightly above normal, supporting normal access to food from own crop production. Improved fuel availability and lower prices will encourage households to cultivate more land area and will increase farmers’ profits from crop sales.
• Opportunities for casual labor will likely remain overall similar to current low levels and will likely slightly decline during the winter in December/January. Wage rates are expected to remain stable.
• Staple wheat flour prices are expected to remain stable or decline slightly over the course of the projection period (Figure 9).
• Terms of trade for laborers will likely remain generally stable.

Most Likely Food Security Outcomes

Throughout the projection period, poor households will likely continue to struggle to meet their needs amid persistent high market prices. Those dependent on unskilled labor wages are expected to be worst-affected due to low availability of income-earning opportunities. Meanwhile, poor households will continue to access income from agricultural labor opportunities as high demand for labor persists through December, supported by the harvest season for fruits and vegetables, cereals, and cash crops. However, the poorest of households will likely continue to face food consumption gaps and Crisis (IPC Phase 3) outcomes, with Crisis (IPC Phase 3) outcomes expected to persist at the area level.

Recommended Citation: FEWS NET. Yemen Food Security Outlook Update, June 2023: Improved purchasing power mitigates negative impacts of assistance cuts, 2023.