The Arab Monetary Fund (AMF) will provide a $144 million loan to Yemen this year to help its financial reform program, the fund said on Monday.
Pro-democracy protests in 2011 brought Yemen, a U.S. ally and neighbor of top oil exporter Saudi Arabia, to the brink of civil war and dealt a blow to its already dismal economy.
Recovery has been weak as political turmoil continues and attacks on oil installations deprive the government of vital budget revenues.
The AMF loan will support a set of reforms begun in 2012 that aim to stabilize the Yemeni economy, improve living standards and restructure government departments and their services, the fund said in a statement.
The first, $96m-tranche of the loan was signed on Sunday and a second tranche will be provided later.
The latest loan brings the total AMF support to Yemen to $1.1 billion in the past two years, the fund said.
A third of Yemen’s population live on less than $2 a day, inflation runs at 14 percent and about 35 percent of people are unemployed.
Sanaa is also struggling with an Islamist insurgency linked to al Qaeda, a separatist movement in the south, and with Shi’ite Houthis who want more say in politics.
Last year wealthy Gulf Arab states, Western governments and other donors pledged $7.9bn in aid over several years to Yemen but only a small fraction of the money has so far arrived.
The International Monetary Fund hopes to agree a new longer term loan for Yemen by the end of 2013 and mobilize aid from international donors.