global trade

Yemen needs new financing to cushion wheat supply shock

Reuters
Yemen needs new financing to cushion wheat supply shock

WHEAT FLOUR. A worker carries a sack of wheat flour outside a store in Sanaa, Yemen, May 17, 2022.

Khaled Abdullah/Reuters

Disruption to global wheat supplies due to the Ukraine war and a sudden wheat export ban by India risk deepening Yemen's hunger crisis

ADEN, Yemen – Yemen is searching for new wheat suppliers but will need help to pay for increasingly costly imports, an official and a main importer said, as the World Food Programme (WFP) warned of cuts to food aid for millions already living on the brink of famine.

Disruption to global wheat supplies due to the Ukraine war and a sudden wheat export ban by India risk deepening Yemen’s hunger crisis and pushing up food price inflation that has already doubled in just two years in some parts of the country.

Ukraine and Russia are both major grain exporters and the conflict between them has seen world wheat prices soar. Yemen imports 90% of its food.

The WFP’s country director in Yemen, Richard Ragan, told Reuters the number of people in the Arabian Peninsula country living in near-famine conditions could rise to 7 million in the second half of 2022 from around 5 million now.

The United Nations body feeds 13 million people a month in Yemen, where the economy has been wrecked by years of war, but has since January reduced rations for 8 million of them. It may soon have to make further cuts, after raising only a quarter of the $2 billion it needs for Yemen this year from international donors.

“We’re taking food from the poor and feeding the hungry,” Ragan said. “In June we will have to make some tough decisions about possibly even going down to just feeding 5 million, those who are really most at risk.”

Yemen’s grain requirement is about 4 million tons a year and “we’re coming in at around 25% of that,” he said, adding that the WFP itself had seen food and fuel cost increases of about $25 million to $30 million per month.

Yemen has enough wheat to last three months, the trade minister in Aden told Reuters last week, adding that the ministry was pressing for a $174-million Saudi aid tranche to be used to finance essential imports including wheat.

Saudi Arabia earlier this month agreed to pay the final installment of a deposit promised in 2018.

“The government and importers are looking for alternate markets to import wheat, like Brazil and others, to make up for the 45% of wheat needs that were coming from Ukraine and Russia,” Trade Minister Mohammed Al-Ashwal said.

Financing imports

The seven-year war between a Saudi-led coalition and Yemen’s Iran-aligned Houthi group, which largely controls North Yemen, has caused a serious devaluation of the currency and a shortage of foreign reserves.

HSA Group, one of Yemen’s largest food conglomerates, which also supplies aid agencies, has called for foreign help in the form of emergency mechanisms such as a special import finance fund and a standardized 60-day period for payment.

The firm, which has wheat stocks for Yemen up until August, has been sourcing wheat from France and India instead of Ukraine and Russia, but now there is uncertainty over Indian supplies.

“We’re all lining up in India now…. If no mechanism is put in place to help position the Yemeni private sector, we are afraid other countries will just push us to the back of the queue,” HSA spokesperson Mohamed Hayel Saeed said.

“India was a major market given its proximity within the region and also the price of Indian wheat is around $100 less than the European wheat,” he added.

Last August, the World Bank’s International Financial Corporation provided HSA with up to $75 million in debt financing for its Yemen operations.

In the Houthi-held capital Sanaa, foodstuff trader Ahmad Hanash said flour mills were now using Australian and American wheat, which pushed up prices.

The HSA spokesperson said wheat shipments that had entered Yemen in March and April had been locked in months before “so the actual shock, we will start seeing the shock in the coming months.” – Rappler.com