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Yemen

Economical-Social Updates Bulletin in Yemen, Issue (45) October, 2019 [EN/AR]

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The Depreciation of the Yemeni Currency Aggravates the Suffering of Yemenis

Introduction

This YSEU Issue for October, 2019, aims at providing the readership with more precise data and information on the socioeconomic and humanitarian indicators based on the diagnosis and analysis of the socio-economic issues using scientific practical techniques and methodologies such as SWOT and SMART analysis methods.

This report focuses on the analysis of the exchange rate fluctuations and their socio-economic implications. Failure to adequately prepare for addressing the humanitarian and food needs amid the ongoing war, and respond to foreign exchange requirements to provide food is a contributing factor to famine, affecting all dimensions of food security.

Executive Summary

The steady decline in the foreign exchange rate (Yemeni Riyal devaluation) in 2019 has led to spiraling inflation, thus exacerbating the humanitarian crisis of Yemeni households. The foreign exchange rate deteriorated during September 2019 to YER 602/USD, recording an increase of 2.9% compared to last month, and 180% compared to the pre-crisis period, February 2015.This deterioration of the exchange rate has resulted in multiple acute threats to the basic food and non-food commodity prices as the 2. 9% increase of the US Dollar exchange rate has ramped up the price of the Survival/Minimum Food Basket (MFB) to YER 37,421, which is 1.7% higher than last month, and 115% higher than the pre-crisis rate.

The foreign exchange rate has significantly affected the retail prices of food and basic commodities. Wheat grain and flour prices increased by 3.1% and 5% respectively in September 2019, higher than the exchange rate deterioration levels, and by114.6 % and 97.9 %, higher than the rates prior to February 2015.

With the exchange rate collapse, food insecurity increases. Citizens become vulnerable to food insecurity when they are unable to purchase basic food commodities owing to the soaring prices. Yemen is on the brink of famine. According to the latest Integrated Food Insecurity Phase Classification (IPC) analysis as of January 2019, a total of 20.1 million Yemenis are currently food insecure; of these, 9.6 severely insecure. For the first time, catastrophic hunger hot spots were identified in 45 districts where 238,000 people are at risk of starvation.

The effects of the deterioration of exchange rates and the rapid depreciation of the Yemeni Riyal during January-September 2019 were reflected in the prices of social services, including water, sanitation, education, health and solar energy, leading to increased poverty in society.

The humanitarian assistance provided by the UN specialized agencies, several countries, international organizations and the Saudi Arabia's deposit to deal with the humanitarian crisis in Yemen are one of the key factors that helped mitigate the depreciation in the national currency and the exchange rate.