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Volatility of the Yemeni Riyal: Drivers and impact of Yemeni Riyal’s volatility, Thematic report – January 2020

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Key findings

• Since escalation of conflict in 2015, the Yemeni Riyal (YER) has been losing its value against the US dollar (USD), negatively impacting prices and households’ purchasing power along with humanitarian programmes.

• The interconnected drivers of economic structural weakness and political instability, including the war economy, are the main contributors to the volatility of the YER.

• The instable economic and political climate has made Yemen one of the most complex and challenging financial environments for humanitarian actors to operate in. Humanitarian organisations face major obstacles when it comes to implementing cash programmes.

• The context shows a direct correlation between currency depreciation and price inflation, especially when it comes to the cost of imported staple food. This is due to Yemen’s dependence on imported goods and the dollarisation of the market.

• Currency depreciation is not the only driver of price inflation in Yemen. Other factors include inflated transportation and production costs due to limited infrastructures and fuel shortages/increase in price; increased risks for traders due to insecurity; shortage of commodities and consequent price speculation; and taxation of basic commodities.

• As the price of basic commodities increases, Yemeni households not only struggle to purchase food, but also to pay for transportation, electricity, and water. The soaring cost of these basic services is directly linked to increased fuel prices.


This report is the result of joint analysis process led by the Cash and Market Working Group (CMWG), which included cash experts, and consultants for the humanitarian sector working on Yemen together with the ACAPS YAH. It explores the drivers behind the volatility of the Yemeni Riyal (YER) and its consequences. This includes fluctuation of commodity prices in the market, the reduction of household purchasing power, and challenges to humanitarian response programmes in Yemen.

The main objective is to shed light on the issues that are behind currency volatility in order to have a better idea of how it can be avoided and, more importantly, what actions humanitarian stakeholders can take to limit its impact on households and humanitarian cash programmes. To support this, the CMWG has included a set of recommendations for advocacy and operations directed to the Cash and Market Working group members, as well as to other humanitarian actors, and donors involved in cash response in Yemen. The recommendations suggest the importance of coordinated action by humanitarian partners in advocating for unified economic regulations in Yemen, as well as in monitoring and reporting on currency exchange rates and basic commodity prices.

This report is based on a review of secondary data (quantitative and qualitative), and on interviews with key cash actors, cash experts, and economic advisors. The CMWG has a high degree of confidence in the reliability of the findings presented here because of the quality of the information sources. Interviews and data analysis for this report was carried out from May – August 2019. Scenarios are based on a combination of secondary and primary data. It was particularly challenging to give projections of the value of the Yemeni Riyal against the USD in the next six months and to forecast a currency exchange rate for the upcoming semester.