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Yemen inflation hits one-year high, central bank's reserves drop

Yemen's annual inflation rate hit a one-year high of 10 percent in August

Published: Updated:

Yemen's annual inflation rate hit a one-year high of 10 percent in August, while central bank reserves fell further in September, official data showed on Monday, as the country continues to face political uncertainty.

The impoverished nation has been in turmoil since Houthi fighters captured the capital Sanaa in September, forcing a government change. They have also clashed with Sunni tribesmen allied to al Qaeda militants when expanding south and west of Sanaa.

The rise in headline inflation, from 8.9 percent in July, to double digits will dash prospects for an interest rate cut to underpin the faltering economy.

Core inflation, which excludes volatile prices of food, tobacco and qat leaf, remained at 12.8 percent in August for the
third month in a row, the highest level since May 2012. The central bank has not changed monetary policy since
slashing interest rates by 5 percentage points between October 2012 and February 2013, bringing them to a three-year low of 15 percent.

Food inflation accelerated to a nine-month high of 7.2 percent year-on-year in August, from 5.5 percent in July, the central bank's monthly report showed.

Meanwhile, inflation for tobacco, cigarettes and qat leaf, which many of the country's 27 million people chew daily, quickened to 12.2 percent, the highest level this year, from 11.0 percent in the previous month.

Compared to the previous month, headline inflation in Yemen, where a third of the population lives on less than $2 a day,
jumped 1.7 percent in August after rising 2.7 percent in July.

Frequent bombings of oil pipelines by tribesmen have hurt oil revenues and the central bank's gross foreign asset reserves
slipped to $5.1 billion in September, or 4.8 months of imports, their lowest level since July, from $5.2 billion in August.

Crude oil exports, which together with liquefied natural gas account for around 54 percent of government budget revenue,
plunged 46.5 percent year-on-year to $123.6 million in September, the lowest level since May.