The governor of the Central Bank, Mohammed Awadh bin Hammam, told local media in April that the CBY's stock of foreign reserves had continued to fall, reaching US$5.1bn by mid-April, down from US$5.9bn at the end of December 2010, a decline of 13.6%. According to the governor, some US$800m had been used to help cover the bank's foreign-exchange liabilities, which totalled a gross US$1.6bn, with a further US$596m set aside for the purchase of oil derivatives; US$257m to cover import credit; and US$343m to cover foreign-currency demand by local commercial banks. The remainder was utilised for Yemen's overseas operations, including diplomatic expenditure, paying interest on foreign-currency loans, as well as, surprisingly, the expenses of the state-owned Safer Exploration and Production Operations Company.

The drawdown of the CBY's foreign-currency holdings comes despite a sharp increase in international oil prices, which would, typically, have been expected to buttress the country's reserve holdings. In comparison, for example, foreign reserves leapt higher in 2008, reaching their all-time highs that year, in line with record international oil prices at the time.

Demand for hard currency has placed unstinting pressure on the Yemeni riyal. Since the start of the protests in February, the riyal has lost about 20% of its value. It is unclear exactly how much the riyal has fallen in the last three or four months, since the CBY has failed to update its daily exchange-rate web page over that period. The riyal was trading at around YR213:US$1 before the outbreak of the unrest, and it reportedly slipped to YR240:US$1 in April. The medium-term concern is that additional depletion of Yemen's reserves could further weaken the riyal. However, the more immediate short-term concern is the impact the depreciation of the riyal is having on domestic consumer prices.

Consumer price data after January 2011 is not yet available, but local media have reported estimates from economists at the University of Aden, who claim that inflation may have risen to as high as 18% at the end of the first quarter, up from 11% at the end of 2010 (it had reached 12.9% at the end of January). Certainly, anecdotal evidence corroborates this; a 50-kg sack of sugar currently sells for YR11,000 (US$50) in Sanaa-and as high as YR14,000 in remote rural areas-up from its normal price of YR9,000. Similarly, the price of other staples, such as wheat, cooking oil and milk, are all believed to have increased by as much as 25%. Yemen relies heavily on imports of foodstuffs to meet its domestic needs, with imports of foodstuffs and live animals typically reaching around 22% of the total.