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KEY HIGHLIGHTS
The local currency (YER) in Government of Yemen (GoY) areas sustained declining trend against the US Dollar, decreasing by 2 percent month-on-month, reaching a historic low of 1,904 YER/ 1 USD in August 2024. Meanwhile, the YER remained stable in SBA areas over the same period. Over the last two years, the YER in GoY areas has substantially depreciated, losing 26 percent of its value year-on-year and 38 percent against the 3-year average (3-YA). In contrast, in SBA areas, the YER has strengthened, appreciating by 5 percent against the USD compared to the 3-YA while remaining relatively stable over the past 12 months (Table 1 & Figure 1). The weakening of the YER in GoY areas is primarily because of depleted foreign exchange reserves, which have recently been aggravated by the banking sector disruptions. Meanwhile, stringent exchange rate regulations in SBA areas have helped maintain exchange rate stability despite USD shortages. However, the ongoing banking crisis poses a risk of heightened currency depreciation in both areas.
Food imports increased by 33 percent in August compared to the previous month’s volumes but remained slightly below the levels observed a year ago. Wheat imports through main ports (Al Saleef, Aden) increased in August 2024; however, they remained lower than the peak levels of April -May and those of August 2023. In contrast, wheat imports volumes through Al Hodeidah significantly decreased by more than half (54 percent) month-on-month, partly due to the ongoing Red Sea attacks on transit ships, recent attacks on Al Hodeidah Port and delays in supplier contracts (Figure 2). Despite these challenges, essential food commodities, petrol and diesel were amply available in most markets nationwide during August 2024. Overall, significant shortages are not anticipated in the short-term, owing to a 12 percent increase in wheat imports via the three ports (Al Saleef, Al Hodeidah, and Aden) between January and August 2024 compared to the same period in 2023, as well as high prepositioning during April-May 2024.
Fuel prices in GoY areas continued to increase modestly in August 2024, while remaining stable in SBA areas. In August 2024, diesel and petrol prices in GoY controlled areas increased slightly by 4 percent compared to the previous month, whereas prices remained relatively stable in SBA areas, primarily due to price controls (Refer to Figure 3 & Table 1). However, when compared to the same period in 2023 and the three-year average (3-YA), diesel and petrol prices in GoY areas saw a significant increase, rising by 29 – 30 percent and 45 – 50 percent, respectively. Conversely, SBA areas saw relative stability year-on-year and reported a decrease of 9 – 12 percent compared to the three-year average. The increase in fuel prices in GoY areas is attributed to the depreciation of the local currency (YER) against the US Dollar and the slight decline import volumes through Aden and other Arabian Sea Ports during the first eight months of 2024 compared to the same period last year.