Six months of unrest and rising violence in the south have crippled the Arab economy, which surged 8 percent last year.The central bank's foreign reserves fell by around $1.3 billion in the first six months of this year and were below $5 billion by the end of July, Central Bank of Yemen Gov. Mohamed Bin Humam told Reuters on Tuesday."Our current net foreign reserves as of July 30 stand at $4.6 billion. We expect the level to improve once we put the political crisis behind us," Humam said in a written response to questions.The turmoil has led to power shortages and forced many factories to close, laying off tens of thousands of workers, and tourism revenues and foreign direct investment have fallen sharply."The economic impact of the crisis forced us in the central bank to intervene in the market and provide a major (tranche) of foreign exchange to cover the loss of FX inflows," Humam said.The IMF warned last month that inflation in the country could surge to as high as 30 percent this year due to the unrest, but Humam said annualized inflation stood at 15 percent at the end of May and should start to ease."We expect this rate to improve during the second half of the year as we expect domestic inflation to subside with higher rain falls and expected improvement on the political front," he said.Yemen's rial currency has lost around 14 percent of its value during the protests, nearing an historic low of 250 to the dollar seen last August. It has traded at around 243 to the dollar for the past two months. The rial's market rate stood at around 235 to the dollar on Aug. 1, the central bank said."This rate, which we call crisis rate, reflects market forces and without any intervention from our side," Humam said. "The central bank has introduced several measures in the forex arena that aim at limiting speculation activities and increasing the role of the banking sector," he said, without giving further details. The turmoil has triggered a liquidity crisis among commercial banks with depositors rushing to withdraw from their dollar and rial accounts. "The central bank stepped in to help solving banks' liquidity issue and provide enough cash in both dollars and Yemeni rial to satisfy banks customers' needs," Humam said.Yemen, where a third of the population faces chronic hunger, is the Arab world's poorest country with a per capita income of less than $2,600. Poverty, corruption and soaring unemployment have helped fuel the protests since January. Some 40 percent of Yemen's 23 million people live on less than $2 a day.Officials say months of protest have cost Yemen $4 billion this year, and it needs $1.5 billion in foreign aid to meet development plans."All these unfortunate developments will have an adverse impact on GDP growth for this year," he said."It is difficult, however, to forecast growth for this year, as it is difficult for anyone to tell how long this situation will continue." Last month, the International Monetary Fund (IMF) forecast Yemen's economy would contract this year, reversing a previous forecast for 3.4 percent growth.