Yemen's government has offered to resign within a month and to review an unpopular decision to cut fuel subsidies, in an attempt to end protests by the Shia Houthi movement, Reuters news agency has reported quoting a government source.

The source, who is from Yemen's presidential committee, on Saturday said officials had handed to the Houthis a draft proposal that includes an offer to form a new government within a month and to set up an economic committee to review the fuel subsidy issue.

"This proposal will take effect in exchange for the Houthis removing their camps from Sanaa, they can either respond or leave the capital if negotiations fail," said the source.

Tens of thousands of Yemenis had massed in the capital Sanaa a day earlier in a protest called by the Houthis to demand the government's resignation and a reversal of the subsidy cuts.

The rally came at the end of a week of demonstrations that have piled pressure on President Abd-Rabbu Mansour Hadi, who has struggled to keep order in the US-allied country which borders major oil exporter Saudi Arabia.

Houthi response

There was no immediate response to the offer from the Houthis, who have been fighting for years for more power for their Zaydi Shia Muslim sect in north Yemen.

However another source from the presidential committee told Reuters that they had received a positive response from the Houthis and would hold a final meeting with them.

Public anger over the subsidy cuts has helped bring people onto the streets, demanding participation in a future government as the majority Sunni country moves towards a federal system that devolves more power to regions.

On Friday, the Houthi movement set up tents near the interior, telecommunications and electricity ministries in a side street that leads to Sanaa's airport, saying they would stay until their demands were met.

Yemenis are unhappy about the government's decision in late July to cut energy subsidies to reduce its budget deficit, a move which led to a rise in fuel prices.

The government spent about $3 billion on subsidies last year, nearly a third of state revenues.    

Source: Agencies