Brief Update on the impact of rapid depreciation of Local Currency (YER) against US dollar on the Prices of Essential Food and Fuel Commodities
Summary:
This update is a supplementary brief provided to serve as early warning to various stakeholders highlighting the latest impact of the ongoing fall in exchange rate of the local currency value against foreign currencies in particular to US dollar. Prices of imported and processed commodities such as sugar, wheat, rice, cooking oil and fuel, cooking gas continued with an upward trend at a much steeper rate in the past three weeks of September, following the fast depreciation, due to market factors including trader’s prices increase to match the YER value losses. For a country dependent for more than 90 % import requirements coupled with the fast depreciation of the currency will continue to worsen the livelihoods and food security of the population at famine risk.
The escalated conflict in the main port of Hodeidah which handle more than 60-70 % of the import will further constrain availability and escalate the prices of essential commodities coupled with the currency depreciation. It is also important to note that, the nominal wage and income of the Yemenis further deteriorated while the commodity prices in 2nd week of September 2018 increased by 100% on average for the minimum food basket compared to pre-crisis prices in February 2015. Besides, the rapid depreciation of the currency, scarcity and the rise in nominal price of fuel will further push upward the prices of all commodities (imported and locally produced) through inflated transport costs.
Currency depreciation:
Over the years, the value of the Yemeni Rial (YER) has been on a downward trend against the foreign currencies. The unofficial exchange rate (buying rate) and prices of essential food commodities and fuel are collected from key markets within main capital cities and towns in 13 governorates (Abyan, Aden, Al Baidha, Ad-Dale, Al Hodeida, Dhamar, Hadramout, Hajjah, Ibb, Lahej, Shabwa, Sana’a City and Taiz). The exchange rate still continued showing increasing trend in the third week affecting the price fluctuations and increase on essential commodities compared to August 2018. At Governorate level, Aden, Hadramout (Mukalla), Ad-Dale and Hodeidah had the highest increase in exchange rate by 13%, and 12% respectively, followed by Sanaa City, Taiz, Lahej and Shabwah with an increase of 11% compared to the average exchange rates in August 2018. Hadramout and Aden are the most affected governorates during the third week of September 2018.
