SANAA (Reuters) - Huge crowds across Yemen demanded on Friday that President Ali Abdullah Saleh leave after months of unrest which has put the Arab world's poorest country on the brink of an economic meltdown.

But in a defiant speech to thousands of flag-waving supporters in the Yemeni capital, Saleh declared: "We will confront a challenge with a challenge."

Three people were killed and 15 wounded when troops shot at protesters in Ibb, a city south of Sanaa, medics and witnesses said. Demonstrators then set fire to an armored troop carrier. Gunfire wounded three protesters in Yemen's third city, Taiz.

The latest killings pushed the overall death toll since protests began to at least 170.

Saleh, a wily political survivor, has clung to power despite defections from politicians, army officers and tribal leaders.

Armored vehicles, troops and even military academy students with batons deployed in Sanaa to contain a sea of protesters stretching seven km (four miles) down a main street in Sanaa.

"We are steadfast, you leader of the corrupt," anti-Saleh demonstrators chanted. "Peaceful, peaceful, no to civil war."

Protesters in Sanaa, Ibb, Taiz and Hudaida held funeral processions for some of the 13 protesters killed on Wednesday, as tensions simmered after a spike in bloodshed in recent days.

In Sanaa, six coffins were taken to graves strewn with red roses. Some protesters held signs saying: "We won't be silent over this regime's crimes. The blood of martyrs is not cheap."

Saleh, addressing his supporters, denounced opponents as "saboteurs" and said the protesters, growing increasingly frustrated by their inability to dislodge him, should head to the ballot box if they wanted to unseat him.