Yemen central bank stops guarantees for rice, sugar imports - sources

DUBAI, Feb 19 (Reuters) - Yemen’s central bank has told traders and local banks it will no longer provide lines of credit for the import of sugar and rice at the official exchange rate, merchants and local bankers said on Friday.

The move takes immediate effect and is likely to further deepen the country’s humanitarian crisis. Yemen is in the midst of a war between the Iran-allied Houthis, who control the capital Sanaa, and President Abd-Rabbu Mansour Hadi’s government, which is backed by an Arab coalition led by Saudi Arabia.

One merchant told Reuters that until the beginning of February, the central bank had covered all the country’s import needs of medicine, wheat, rice, sugar and milk at the official exchange rate of 215 riyals to the dollar.

“With this decision, the lines of credit would be limited to wheat and medicines only,” said the merchant, who asked not to be named.

A banker confirmed this, saying the central bank had explained it was no longer able to provide cover for imports at the official rate and had asked merchants to buy foreign currency on the black market, where the rate is 256 riyals to the dollar.

The U.N. Food and Agricultural Organization (FAO) has warned of a “staggering” crisis, saying famine looms as over half the population, or some 14.4 million people, are short of food.

Reporting by Mohammed Ghobari in Cairo, writing by Sami Aboudi