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June 10, 2008

Govt offers cost-cutting package

Malaysia announced Monday a 2.0-billion-ringgit ($612 million) cost-cutting package aimed at softening the blow after an unpopular 41 percent fuel price increase.

"With all the cuts the government is making, we are expecting to save 2.0 billion ringgit annually," said Prime Minister Abdullah Ahmad Badawi.

"I understand the suffering of the people and I hope these measures can help the people."

Petrol prices were increased by 41 percent and diesel 63 percent in line with a global surge in oil prices, a measure that would drive inflation to a 10-year high of 4.2 percent in 2008.

"In all honesty, it was a difficult and agonising decision to make. Many times, we have been tempted to walk away from such a difficult decision," Abdullah told an energy conference.

Spiralling crude oil prices, which were trading at $136.80 a barrel on Monday, have driven up the cost of fuel subsidies for many governments to near crippling levels.

Malaysia followed India, Indonesia, Taiwan and Sri Lanka last week, raising pump prices and provoking a public outcry and protests by opposition groups.

Analysts said Abdullah's political future remained at risk, but he could contain the political backlash if he carried through the measures aimed at reducing the impact on low-income individuals.

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