Yemen's increasing difficulties to obtain letters of credit (L/Cs) is partly the cause of many areas of the country edging close to famine.

The country's central bank has been able to finance some food imports (DC World News, 16 June 2016), but its reserves and its ability to foot the bill for food imports appear to be diminishing.

Credit cuts

Banks worldwide have been steadily cutting credit lines for traders shipping food to Yemen, due to increasing fears they would not be repaid due to civil war and a fragile banking sector.

Now, a Reuters investigation has confirmed that the supply of L/Cs and guarantees from commercial banks has dried up.

Funds blocked

There are funds in Yemeni banks of around US$260 million but these cannot be transferred out of the country, partly because relations with many Western banks have broken down according to aid workers who are warning of the prospect of famine.

Yemen's central bank would not participate in the Reuters investigation but just over a month ago, the IMF warned that the bank's reserves, which have been depleting for two years, had sufficient funds for just two months' imports.

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