Malaysia cuts fuel prices to ease inflation

Aug 23, 2008, 3:04 GMT

Kuala Lumpur - Malaysia's government Saturday reduced the retail price of petrol by 5.6 per cent to help curb rising inflation.

The pump price of gasoline was fixed at 2.55 ringgit (0.77 dollars) per litre down from 2.70 ringgit. Diesel prices have been reduced from 2.58 ringgit to 2.50 ringgit per litre.

Prime Minister Abdullah Ahmad Badawi made the announcement late Friday, saying the move would help curb inflation, which rose to a decade-high of 8.5 per cent in July.

'The government hopes that the reduction in gasoline and diesel prices will help to ease consumers' burden as well as ease inflationary pressure,' Abdullah said in a statement.

With the reduction, the government is giving a public subsidy of 30 sen (0.3 ringgit or 0.09 dollars) per liter on gasoline and of 50 sen on diesel, he said.

The announcement came as a surprise as Abdullah said recently that pump prices would be reduced only at the end of the month, and only if global crude oil prices continued to fall.

In June, the government raised petrol prices by a whopping 41 per cent and diesel prices by 63 per cent, saying the move was aimed towards easing the country's massive subsidy bill.

Despite the raise, fuel prices in Malaysia have remained among the lowest in the region.

Saturday's lowered prices come ahead of a parliamentary by-election on Tuesday in which Abdullah's ruling coalition faces opposition leader Anwar Ibrahim, who is expected to win easily.

Anwar's three-party opposition alliance made major gains in the March 8 general elections by winning 82 of Parliament's 222 seats and taking control of five out of Malaysia's 13 states. Anwar has claimed the opposition is ready to take over government by mid-September.