Yemen

Yemen Market Watch Report, Issue No. 4 (August 2016)

Attachments

Highlights

  • Prices of food and fuel commodities further declined in August but still remain significantly higher than the pre-crisis levels.

  • The cost of the minimum food basket also reduced by 9.5% between July and August 2016 but is still 19.5% higher than the pre-crisis level.

  • Low level of imports persisted and availability of food and fuel commodities continued to be scarce in most markets of the country.

  • According to Alert for Price Spikes (ALPS) methodology, in August 2016, normal situation prevailed for vegetable oil and red beans while wheat flour was on alert status and sugar was on crisis.

Macroeconomic Situation

The national Yemen currency balance outside banks increased by YER 296 billion during January-June 2016 compared to the annual increase by YER 26.1 billion in 2014 and by YER 222.8 billion in 2015. Moreover, the increase was significant in June 2016, reaching YER 133 billion representing 44.9% of the increase in currency outside banks during the first half of 2016. This clearly shows the severe pressure imposed on liquidity in the banking system during June 2016; thereby resulting in an unprecedented liquidity crisis1 .

The economic impact of the ongoing conflict-induced crisis has been devastating for Yemen, aggravating an already deteriorating pre-conflict economic performance. Salary payments are now irregular due to funding constraints of the Central Bank of Yemen (CBY). The black market exchange rate of the Yemen Riyal (YER) in August ranged from 295 to 315 per one US Dollar, which is much higher than the official rate (YER250/USD)2 . The current poor functioning of the country’s financial system coupled with highly depleted foreign currency reserve has created serious obstruction to the traditional trade financing instruments such as Letters of Credit, further complicating the ongoing humanitarian crisis.