Yemen's food supply chain has continued to function through five years of conflict, partly due to the availability of letters of credit (L/Cs) to import essential foodstuffs.

But competing L/C systems are amongst several factors that have pushed up food prices substantially.

L/C complexities

Separate L/C systems operate under the auspices of the Central Bank of Yemen's two rival head offices.

One central bank office is supported by Saudi Arabia and located in the southern port of Aden, the seat of the Riyadh-backed government. The other is in the Yemeni capital Sanaa, now controlled by the Houthi group that has been fighting a Saudi-led coalition for almost four years.

Spiralling prices

Food prices doubled between 2015 and 2019, and continue to rise according to a recent report by two non-profit, non-governmental organisations, the Assessment Capacities Project hosted by the Norwegian Refugee Council and US-based Mercy Corps.

They say the increase in food prices since 2015 is primarily a result of the drop in the value of the Yemeni riyal. Yemen relies on imports for 88 per cent of its food supply, making it highly exposed to currency fluctuations.

Declining L/C support

The three main sources of food import financing and currency stability - remittances, Saudi-funded L/Cs and foreign aid - are all declining according to the report.

It also blames competition to control import financing by both sides in the conflict, competing L/C systems, divergent monetary policy, and attempts to control fuel supply chains all add to the complexity of food supply chains. Higher operating costs are passed on to consumers as higher prices the report concludes.

This article represents the views of the author and not necessarily those of the ICC or Coastline Solutions.