Yemen economy heading for "unprecedented calamity", U.N. says

DUBAI, June 25 (Reuters) - The United Nations says Yemen’s war-shattered economy is headed for “unprecedented calamity” due to large cuts in aid, slowing remittances, a weakening currency and the coronavirus pandemic.

U.N. aid chief Mark Lowcock also urged donor states to inject foreign currency into the central bank, and disburse and increase humanitarian funding to avoid “total economic collapse”.

Around 80% of Yemen’s population is reliant on aid due to a six-year-old war that has divided the country between the Saudi-backed government in the south and the Iran-aligned Houthi movement in the north.

The Yemeni rial weakened in recent weeks to around 620 to the dollar in the north and 750 in the south, and could hit 1,000 by the end of the year, Lowcock said in a statement to the U.N. Security Council on Wednesday.

When the rial reached a nadir in late 2018 of around 800 to the dollar, the United Nations warned of impending widespread famine in Yemen, which relies heavily on imports.

“Food prices have risen by 10 to 20% in some areas just in the last two weeks. Without new hard currency injections, this will only get worse,” Lowcock said, adding that “Yemen’s economy ... is heading for an unprecedented calamity”.

In 2018, Saudi Arabia deposited $2.2 billion at the central bank controlled by the Saudi-backed government to stabilise the currency and facilitate imports.

“But those funds are nearly depleted, and no one has stepped forward to fill the gap,” Lowcock said.

Additionally, remittances sent home by Yemenis working abroad may have fallen between 50 and 70% since coronavirus began to impact other economies, he said.

Political divisions are exacerbating the problem.

Commercial fuel ships have been unable to enter the Houthi-controlled port of Hodeidah since June 8 due to a dispute over import revenues between warring sides. Fuel is needed to pump water and keep health centres running, Lowcock said. (Writing by Lisa Barrington, Editing by William Maclean)