Yemen protest
Tribesmen loyal to the Houthi Shi'ite group demonstrate to demand for the resignation of the government in SanaaReuters

The International Monetary Fund has signed off on a loan to Yemen worth $553m over three years.

The Washington based fund agreed the loan in a bid to boost economic growth in the Gulf nation, which remains a key American ally in the region.

The approval means that $74m (£45m, €56m) can be released immediately to Sanaa.

Yemen's capital Sanaa has been gripped by demonstrations in recent weeks as thousands took to the streets in protest over reforms to fuel subsidies.

The subsidy was lifted on July 30, causing fuel prices to almost double overnight, but also paving the way for the IMF loan to be approved.

The Yemeni government had made "commendable efforts to support macroeconomic stability and growth. Nonetheless, political and security challenges have continued to weigh on the policy environment and economic outcomes," said Naoyuki Shinohara, the IMF's deputy managing director.

"In particular, fiscal and external balances have weakened due to delays in key reforms and increased sabotage of oil facilities. Looking ahead, the main challenges are to improve the fiscal and external positions, as well as support inclusive growth and job creation," he said.

The IMF has predicted that Yemen's gross domestic product growth will slow to 1.9% in 2014, down from 4.8% in the previous year.