Concern is growing over an ongoing delay in the announcement of the next cycle of Yemen's letter of credit (L/C) import financing mechanism that provides foreign currency to traders at preferential exchange rates.

Although applications for the L/C mechanism are usually filled on a quarterly basis, no action has been taken since the Central Bank of Yemen in Aden completed the January round according to informants who spoke to the Famine Early Warning Systems Network (FEWS NET).

Created by USAID in 1985 to help decision-makers plan for humanitarian crises, FEWS NET provides evidence-based early warning and analysis on food insecurity on approximately 30 countries.

Hard currency choices

The lack of L/Cs has increased importers' reliance on the parallel market for hard currency according to FEWS NET's analysis.

It concludes that while levels of staple food imports will likely remain steady given stable demand for staple food commodities, retail prices are expected to increase further across the country in the coming months.

Seven year plight

Yemen has relied heavily on external assistance for the seven years it has suffered from crippling domestic conflict exacerbated by the involvement of rival regional neighbours. The macroeconomic situation continues to deteriorate, driving further increases in food prices.

High levels of displacement continue, separating households from livelihoods and assets and increasing competition for income-earning opportunities and resources.

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