Western banks had already cut credit lines for traders shipping food to Yemen, fearing they would not be repaid due to the security chaos and fragile financial system.
Now, they are increasingly unwilling to offer letters of credit, which guarantee sellers will be paid on time.
They are reluctant to offer guarantees because the banking system has seized up.
An international commodities trade source involved in the food trade with Yemen, who has knowledge of the country’s financing troubles, said as much as $260m — held in different foreign currencies in Yemeni banks — cannot be transferred abroad partly because relations with many Western banks had broken down.
An aid official also confirmed the amount of funds frozen was at least $260m.
This means that traders must withdraw the money in Yemen, and then send it abroad, usually by plane, a solution fraught with difficulties at a time of war.
Without imported staples such as wheat and flour, the United Nations says many areas of Yemen are now close to famine as most buffer stocks have been drawn down.
“This problem is getting worse and no Yemeni bank can transfer money out directly. They have to fly funds out to the nearest country and make deposits in accounts abroad,” the international commodities trade source said.
“These funds are probably likely to remain stuck for the foreseeable future. For private importers — this is just another hurdle and a further sign of the worsening crisis in bringing goods in.”
Officials at Yemen’s central bank declined to comment. Last month a central bank spokesman said it had decided not to conduct interviews during the crisis.
The aid source, also familiar with the financing issues, confirmed separately there had been efforts to fly out funds to be used to pay for goods.
“There are still sizeable funds stuck inside Yemen due to a lack of correspondent banking or access to basic trade finance for Yemeni importers,” the aid source said.
“There is no external financing they can get hold of to provide guarantees for the other companies they are buying from that they will get paid. Flying money out is one way but this is also proving hard to do.”
Over the past year, a Saudi-led coalition has tried to reverse a bid for national power by Houthi rebels — seen by many Gulf Arabs as a proxy for regional arch-rival Iran in a conflict in which thousands have died.