DUBAI, Nov 7 (Reuters) - Yemen's annual inflation eased to 12.8 percent in July, the lowest level since February, as an increase in food prices moderated, central bank data showed on Thursday.
Inflation hit a peak of 25 percent in October 2011, then fell as low as 5.5 percent last November as the economy showed signs of revival after two years of political unrest. But price growth bounced back again to hit a 16-month high of 14.5 percent in June this year, mainly because of higher prices for food, tobacco and the stimulant qat.
The latest data showed consumer prices rose just 0.3 percent month-on-month in July, down from a 0.8 percent increase in June.
Food inflation in the poor Arabian Peninsula state decelerated to 11.7 percent year-on-year in July, the lowest reading since January, from 15.1 percent in the previous month.
However, annual price growth for tobacco, cigarettes and qat, a mild stimulant leaf that many of Yemen's 25 million people chew daily, rose further to an 18-month high of 33.3 percent in July from 32.8 percent in the previous month.
Excluding food and qat, annual consumer price inflation was 7.2 percent for the second month in a row in July, the highest rate since November 2012.
The central bank cut interest rates by 5 percentage points between last October and February this year to a three-year low of 15 percent in order to support an economic recovery.
The central bank's head said in September that the bank would need to watch inflation before deciding whether to reduce borrowing costs again. He added that headline inflation was expected to decelerate to around 6-8 percent by the end of this year.
The International Monetary Fund forecast in October that Yemen's inflation would average 12.0 percent in 2013, raising its previous April prediction of 7.5 percent. Consumer prices grew 10.2 percent in 2012.
Meanwhile, the central bank's gross foreign assets edged up to $5.7 billion in August, equivalent to 6.1 months of imports, from an 11-month low of $5.6 billion in July, or 6.0 months, the data showed.
Yemen, the second poorest Arab state after Mauritania, depends on crude oil exports to replenish its foreign currency reserves and cover up to 70 percent of the government budget. But frequent attacks on pipelines by disgruntled tribesmen have squeezed state income.
Saudi Arabia provided a $1 billion loan to boost Yemen's central 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 8.6 percent month-on-month to $251 million in August but were down 22.4 percent from their year-ago level, the data showed.
(Reporting by Martin Dokoupil; Editing by Andrew Torchia) Keywords: YEMEN INFLATION/
(Martin.Dokoupil@thomsonreuters.com)(+971 4 362 5832)(Reuters Messaging: email@example.com)
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