Publications

The crisis in Yemen is among the most serious and complex in the world. Over 7 million people are assisted by the World Food Programme (WFP), mostly through in-kind food assistance, but also through a commodity voucher programme1 and nutrition activities. In November 2017, rapid market assessments were conducted in Sana’a, Hodeidah and Hajjah to evaluate a potential scale-up of the current voucher system and the feasibility of introducing cash-based transfers to broaden the portfolio of food assistance programming.2 Despite the uncertainty related to the conflict, the overall market situation seemed sufficiently stable for conducting a market assessment.

However, in November and December 2017, the conflict changed rapidly, leaving the humanitarian community with the challenge of understanding and quantifying the changing needs of the most vulnerable people, and quickly adapting their operations to the new situation. This report presents three possible scenarios. The first is the ‘baseline scenario’, which reflects conditions up until October 2017; the second is the ‘blockade scenario’, which arose in November 2017 when airport and seaport access to and from northern Yemen was closed; and the third is the ‘crisis scenario’, referring to when armed clashes burst out in the streets of Sana’a in December 2017, which led most humanitarian organizations to temporarily redeploy some of their staff. Under the ‘baseline scenario’, despite all challenges faced by the commercial sector, the market environment in the assessed locations seemed vibrant enough to support a gradual scaleup of value-based vouchers, mainly in Sana’a city.

It could possibly support a gradual shift to cash-based interventions using the existing network of traders. The challenges identified were primarily associated with the substantial economic slowdown and the fragile business environment, in which the Central Bank of Yemen is split into two independent ‘branches’ that pursue different monetary policies, and the commercial banking system is scarcely able to support the private sector. Traders often bypass banks in favour of the more agile moneyexchanger system, which is mostly based on remittance flows. Yet worrying levels of local currency depreciation challenge all business activities. UN agencies contended with significant exchange rate losses, especially before working at a negotiated exchange rate. Nonetheless, some food importers have been able to establish strong business models and control the market almost entirely. They allow a large flow of goods to reach Yemen through three main ports of Aden, Hodeidah and Al Saleef, irrespective of depressed demand. In fact, despite the general perception that nominal prices were increasing, real prices actually stayed put for most of 2017 – a clear consequence of low purchasing power.