The Food and Agriculture Organization of the United Nations (FAO) has issued a stark warning, predicting a significant and rapid decline in the value of the Yemeni Rial in government-controlled areas over the next four months. The organization estimates a monthly depreciation of at least 5% due to the ongoing crisis in the banking sector.

In a report titled "Potential Impacts of the Banking Sector Crisis on Household Food Insecurity in Yemen," the FAO states that the Yemeni Rial has already lost 38% of its value against the US dollar in the past year, averaging a 3% monthly decline. The organization expects this trend to accelerate, with the minimum cost of a food basket potentially rising by 6% in government-controlled areas by August 2024.

The report attributes the escalating crisis to conflicting directives issued by the central banks in Aden and Sana'a, leading to significant disruptions in the financial and banking sectors. These actions, characterized by the FAO as "retaliatory financial systems," have resulted in blacklisting of banks, dollar shortages, and a surge in inflation.

The FAO specifically highlights the potential impact on food and fuel prices. The depreciation of the Rial is expected to drive up diesel costs, further increasing food prices due to transportation expenses. This, combined with the difficulty for traders and importers to access dollars, secure credit lines, and transfer funds, is expected to hinder import flows, particularly impacting southern ports.

The report also underscores the potential impact on remittances, a crucial source of income for many Yemenis. The FAO estimates that remittances, exceeding $4.2 billion annually, play a vital role in meeting the food needs of millions in Yemen. However, the banking crisis is expected to exacerbate the decline in remittances, further exacerbating food insecurity.

The FAO concludes that the ongoing banking crisis poses a significant threat to Yemeni households, increasing their vulnerability to food insecurity. The organization emphasizes the urgent need for humanitarian and development assistance to address the escalating food insecurity crisis in Yemen.