LONDON, Nov 16 (Reuters) - - International donors pledged $4.7 billion for Yemen, the Arab world's poorest country and an ally in Washington's war on terror, at a conference in London on Thursday, the World Bank and Yemen said.

Yemen had been hoping to raise up to $5 billion at the two-day donors' meeting.

The World Bank and Yemen said in a statement that the $4.7 billion pledged from 2007 to 2010 was a "significant increase in assistance and represents over 85 percent of the government's estimated external financing needs" over the four-year period.

"It is not 100 percent of what Yemen was hoping for, but I think it is an excellent start ... A number of donors, including the World Bank, have stated that we are prepared to increase our contributions of course as progress in reforms continues," Daniela Gressani, World Bank vice-president for Middle East and North Africa, told Reuters.

"There is a a significant amount of infrastructure investment in the public investment programme and everyone knows Yemen needs infrastructure development. But ... I would like to see a significant amount of funds devoted to human development and government institution-building," she said.

Yemen has been under pressure from international donors to push through political and economic reforms and to crack down on corruption.

Yemen's President Ali Abdullah Saleh, who has ruled since 1990 and was re-elected in September, promised in a statement to continue on the path of reform.

Conference host Britain said it would sharply raise aid to Yemen to $222 million over the next four years, making it the European Union's leading aid donor to Yemen.

"The pledges will help improve the quality of life for the people of Yemen by reducing the number of children who die needlessly every year, allow more young girls to go to school and give the economy a welcome injection of funds," Gareth Thomas, British international development minister, said.

Yemen, the ancestral home of al Qaeda leader Osama bin Laden, has cracked down on the group to try to counter its image in the West as a haven for militants.

Ministers from the Gulf Cooperation Council (GCC) states -- Saudi Arabia, Bahrain, the UAE, Oman, Kuwait and Qatar -- attended the conference, along with representatives of the World Bank, the European Union and the United Nations.

Almost half of Yemenis are illiterate and 4 out of 10 people live on less than $2 a day, according to the British government, which says that Yemen's oil, its main earnings source, is expected to dry up by 2015.

The country has faced several militant attacks, including one on the USS Cole warship that killed 17 U.S. soldiers in 2000.