Country: Yemen Source: Famine Early Warning System Network Please refer to the attached file. Key Messages In areas controlled by the Sana’a-Based authorities (SBA), Emergency (IPC Phase 4) outcomes are expected to persist through September in Al-Hudaydah, Hajjah, and Ta’izz governates, with Crisis (IPC Phase 3) outcomes otherwise widespread. Income-generating opportunities remain extremely limited due to reduced operational capacity at Red Sea ports and exorbitant taxes imposed by the SBA. Substantial competition for limited opportunities – heightened by large concentrations of internally displaced persons (IDPs) – further constrains household income. Current conditions are likely to be exacerbated by anticipated price increases associated with the wider regional conflict, resulting in food consumption gaps and the use of unsustainable coping strategies. Meanwhile, in rural highland areas, deteriorating pasture conditions and high fodder prices are expected to force poor pastoral households to sell livestock at below-average prices during the June to August lean season, resulting in well below-average income and purchasing power in rural areas. Crisis (IPC Phase 3) outcomes are expected to persist across areas controlled by the internationally recognized government (IRG) through September, with pockets of households facing Emergency (IPC Phase 4) due to prolonged economic disruption, well below-average labor demand, and severely limited livelihood options. Agricultural labor demand is expected to moderately increase between March and May as land preparation and fruit harvesting progress, but will decline seasonally afterward, while other casual labor opportunities are expected to remain minimal throughout the outlook period. Among the poorest households, incomes are expected to remain insufficient to close food consumption gaps. The wider regional conflict is expected to impact Yemen through several transmission pathways. Yemen is highly import-dependent, and will likely face energy supply and price shocks over time. In both IRG- and SBA-controlled areas, authorities have limited fiscal capacity to cope with rising key commodity prices, including fuel, fertilizer, and food. Price controls are currently in place and expected to slow the pace of price transmission but are unlikely to hold should disruptions persist. IRG-areas are largely self-sufficient for crude oil and natural gas; however, refined petroleum product imports remain important to the economy. SBA areas are fully import-dependent for fuel – mainly from Gulf countries – with a substantial portion of Iranian imports arriving at Red Sea ports on shadow tankers. Maritime trade disruptions are expected to negatively impact both areas, particularly as shipping companies have begun imposing risk fees of approximately 3,000 USD per container. IRG officials have urged shipping companies to eliminate these fees, though negotiations are unlikely to result in reduced premiums, considering the Houthis’ direct engagement in the conflict. On March 28, the Houthis claimed responsibility for missile strikes against Israel, which were intercepted near Beersheba without casualties. While the Houthis maintain the capability to further escalate, a move to close Bab al‑Mandeb Strait or launch sustained attacks on Red Sea commercial traffic is not likely at this time. As of March 31, Israel had not launched retaliatory strikes on Houthi targets in Yemen. Nevertheless, renewed threat of conflict in the Red Sea, combined with increased freight surcharges (including insurance premiums), is expected to reduce commercial shipping and limit still-recovering import volumes in SBA-controlled areas, reducing import tax revenues for the SBA and exacerbating macroeconomic issues. Currency shortages persist in IRG-controlled areas due to a lack of confidence in the monetary system and the Central Bank of Yemen in Aden (CBY-Aden), which has led to local currency hoarding by the public, traders, and speculators. These shortages have delayed or impeded hard currency remittance exchanges, disrupting a typical source of income and creating additional hardships for households amid rising prices and approaching Eid al-Fitr expenditures. Military salary payments, which have been delayed for five months, were distributed in a combination of YER and SAR. Financial institutions are limiting withdrawals or only allowing for small denominations of 100 and 200 YER that are not accepted in markets or banks, despite being legal tender, resulting in very limited relief for households awaiting these payments. In February, CBY-Aden implemented new measures to address cash shortages, including injections of YER from bank reserves and continued pressure on foreign exchange traders to reduce speculation and hoarding, with limited success. Inflationary pressures are impacting all of Yemen, despite price controls. In IRG-controlled areas, key informants report increases in staple food prices in March despite YER appreciation, driven by rising insurance and risk fees associated with the ongoing conflict in the Middle East and weak government price controls. Traders are further exploiting ongoing currency shortages to raise food and non-food commodity prices. In SBA-controlled areas, increased taxation has placed additional pressure on market prices, with vegetable oil and wheat flour in Sana’a City increasing by 6 percent and 2 percent, respectively, compared to January 2025, despite price controls. In SBA-controlled areas, winter wheat and barley harvests have begun in the northern highlands and are expected to conclude in April, while potato harvests in Sa’adah, Ma’rib, and Al-Jawf are increasing agricultural day labor demand. However, high production costs, low-quality seeds, and disruptions to agricultural activities are constraining production and limiting labor opportunities for daily wage workers. Onion farmers in the western coastal region face additional pressures, as a lack of clear government export policies has created a domestic market surplus, while disruptions in export routes and rising costs for agricultural inputs, irrigation, fuel, and transportation are further eroding profit margins. The resulting oversupply of produce has driven prices to record lows, resulting in financial losses for farmers. While the low prices are improving poor households’ access to vegetables, labor demand will likely be negatively impacted in subsequent growing cycles. In lowland coastal areas, the fruit harvest is currently ongoing. However, agricultural exports through the Al-Wadi’ah land border crossing in Hadhramaut are significantly delayed, with over 400 refrigerated trucks reportedly backed up and waiting to cross into the Saudi market as of early March. Prolonged wait times are increasing daily operating costs, as refrigeration systems must run continuously to preserve produce quality, reducing profit margins for farmers and traders. These elevated transportation costs are expected to negatively impact the next production cycle, suppressing agricultural wage rates and labor demand.

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