Yemen inflation climbs to 16-mth high in June, reserves down


* Rise fuelled by tobacco and qat

* Food inflation slows

* Core inflation at 7-month high

* Foreign reserves at 11-month low of $5.6 bln

DUBAI, Sept 30 (Reuters) - Yemen's annual inflation edged upto a 16-month high of 14.5 percent in June, fuelled mainly byincreases in the cost of tobacco and the stimulant qat, whileforeign currency reserves dropped to their lowest level fornearly a year in July.

Inflation had subsided from a peak of 25 percent in October2011 to as low as 5.5 percent last November, as the economybegan recovering from two years of political unrest. But pricegrowth rebounded again to hit 14.2 percent in May this year.

On a month-on-month basis, prices rose 0.8 percent in June,up from a 0.3 percent increase in May, central bank data showedon Monday.

Food inflation in the poor Arabian Peninsula state eased to15.1 percent year-on-year in June from May's 16.6 percent, whichwas its highest level since January 2012.

But annual price growth of tobacco, cigarettes and qat, amild stimulant leaf that many of Yemen's 25 million people chewdaily, rose sharply to a 17-month high of 32.8 percent in Junefrom 27.1 percent in the previous month.

Excluding food and qat, annual consumer price inflation was7.2 percent in June, the highest rate since November 2012, afterstaying unchanged for three consecutive months.

The central bank cut interest rates by 5 percentage pointsbetween last October and February this year to a three-year lowof 15 percent to support an economic recovery.

The central bank's head said on Sunday that the bank wouldneed to watch inflation before deciding whether to reduceborrowing costs again. He added that the headline inflationfigure was expected to decelerate to around 6-8 percent by theend of this year.

The International Monetary Fund forecast in April thatYemen's inflation would average 7.5 percent in 2013, down from10.2 percent in 2012.

Meanwhile, the central bank's gross foreign assets fell toan 11-month low of $5.6 billion in July, equivalent to sixmonths of imports, from $5.7 billion or 6.1 months at the end ofJune, the data showed.

Yemen, the second poorest Arab state after Mauritania,depends on crude oil exports to replenish its foreigncurrencyreserves and cover up to 70 percent of the governmentbudget. But frequent attacks on pipelines by disgruntledtribesmen have squeezed the government's income.

Saudi Arabia provided a $1 billion loan to boost Yemen'scentral bank reserves last year but other foreign aid out of$7.9 billion pledged by donors in 2012 has been slow to arrive.

The country's oil exports rose 9.1 percent month-on-month to$231 million in July but were down 15.6 percent from theiryear-ago level, the data showed.

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