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February 26, 2008

Inflation concerns heightened by soaring fuel price

As Vietnam accelerates market reforms, reducing price subsidies, the government face the threat of runaway inflation which climbed to 14.1 percent in January and is about to edge up higher by about 0.5 percent after prices of petrol went up by 11.5 percent, kerosene and diesel, 36.3 percent respectively on Monday.

Vietnam raised retail fuel prices for the first time in three months on February 26 after the Finance Ministry lobbyied by fuel retailers who are forced to bear mounting financial losses for selling imported fuel at a loss on the domestic market, approved the increase, reported local media. Vietnam is almost entirely dependent on imported fuel.

Petrol prices are up 44 percent since early 2007 and up 70 percent since mid-2005. Crude prices have doubled since mid-2005. State media quoted Petrolimex Deputy Director Vuong Thai Dung as saying that at 13,000 dong a litre for the 92-octane petrol, the company had a monthly loss of more than $100 million.

The popular 92-octane petrol is now 14,500 dong ($0.90) per litre from 13,000 dong, while diesel and kerosene are 13,900 dong per litre, up from 10,200 dong, Petrolimex said in a statement.

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