Saudi Arabia has not asked Yemen for an early repayment of a $1 billion loan and Houthi fighters occupying Yemen's central bank are not interfering in its operations, Yemeni central bank governor Mohammed Bin Humam told Reuters.

Riyadh has suspended most of its financial aid to the impoverished nation, sources told Reuters this week, indicating its unease with the growing political power of Shi'ite Houthi fighters friendly with Saudi Arabia's Shi'ite regional rival, Iran.

With public finances squeezed by fighting al Qaeda militants and frequent tribal attacks on oil pipelines, Sanaa has relied on its wealthy northern neighbour for fuel imports and funding of government salaries and welfare payments.

But soon after Houthi fighters took over the capital Sanaa in September, Sunni Saudi Arabia suspended much of that aid, throwing in doubt the $1 billion loan it deposited in the Yemen central bank in 2012 to shore up dwindling reserves.

"Our brothers in Saudi Arabia have not asked for early repayment and we believe they will not," Humam said in an e-mailed answer to Reuters' questions. "Our strong brotherly ties are above all agreements!"

Riyadh boosted the central bank's reserves with a 12-year loan in September 2012 with the repayment to start after four years. Hurt by oil pipeline bombings, Yemen's gross foreign assets slipped to $5.1 billion in September, or 4.8 months of imports, their lowest level since July.

"Our current level of foreign reserves is still sufficient and in line with our programme with the IMF (International Monetary Fund)," Humam said in a rare interview.

He also said that the Houthi fighters have no influence on the central bank's operations: "We reiterate, there is no intervention in our business and all parties respect neutrality and independence of the Central Bank of Yemen."

Despite an agreement that Houthi fighters would withdraw from Sanaa after a new government is formed, they still man checkpoints around the city and guard many state institutions in the capital, including the central bank.

The cash-strapped government has also not approached the central bank to directly borrow funds from it to finance its budget needs, Humam said: "So far the government has not asked for that knowing the negative effects of that."

With the most Saudi aid halted, the government finds itself in a tight spot although recent fuel subsidy cuts helped make the budget more sustainable.

It can also fall back next year on funding from the IMF, which agreed in July to provide a three-year, $553 million loan based on the government's economic reform pledges.

The IMF predicted in September that Yemen was likely to get 114 billion rials ($530.9 million) in budget support next year, with $250 million coming from its programme. Overall donor loan disbursements, including project funding, were forecast at $615 million, with Saudi Arabia expected to play a substantial role.

Under the law governing the central bank, it may provide temporary emergency financing to the government in exceptional circumstances if that is consistent with its monetary policy.

In 2012, the central bank exceeded the legal limit on how much it may lend to the government by 347.9 billion rials.

Yemen's annual inflation, which hit a one-year high of 10 percent in August, is likely to retreat again, Humam also said, as the impact of severe fuel shortages seen in the first seven months of the year has faded away.

"Now, that the market has calmed down we expect CPI (the consumer price index) to soften and inflation rate for the whole year to be at around 8-9 percent," he said.-Reuters