Vietnam lifts fuel prices sharply

HANOI — Vietnam on Thursday raised petrol prices by 18 percent, adding to worries over rising inflation and resulting in long queues as motorists rushed to fill up before the increase took effect.

Motorcyclists rush into a petrol station to buy petrol minutes before a hike in prices

The hike, which was only announced earlier on Thursday, had been widely expected after Vietnam devalued its currency this month for the fourth time since late 2009, pushing up the cost of imported fuel.

Vietnam subsidises petrol prices to offset the rising global costs of oil, which jumped to their highest in more than two years Thursday as turmoil continued in the Arab world.

Another key consumer commodity, electricity, will increase in price by 15 percent in Vietnam next month.

The government said late Thursday the rise in energy and fuel prices was "necessary" even though fighting inflation is its top priority.

Hundreds of motorbike riders and motorists had waited at one central Hanoi petrol station hoping to beat the mid-morning price rise, which also saw the cost of diesel shoot up about 24 percent.

But many left disappointed after the government-set petrol price jumped from 16,400 dong (78 cents) to 19,300 dong per litre before they could buy.

"Obviously, the rise in petrol prices will lead to increases in other sectors like transport," said Do Tuan Khang, 42, an army officer waiting to fill up his motorbike.

"That's going to aggravate the country's inflation, which is already worrying a lot of people."

Inflation in Vietnam has accelerated every month since August 2010, hitting 12.17 percent year-on-year in January, far higher than its neighbours.

Prime Minister Nguyen Tan Dung on Thursday held an online conference with local officials throughout the country to discuss measures for controlling inflation and stabilising the economy.

After the meeting the government announced on its website that Dung wanted state-owned groups -- a key part of the economy -- to sell foreign exchange to the country's banks.

The move will also boost dwindling foreign reserves at the state bank, helping to control the exchange rate and in turn act as a break on inflation, economist Le Dang Doanh told AFP.

He described the decision as a strong message that the government wants to stabilise the economy, which is facing a complicated mix of challenges including a trade deficit that reached an estimated $12.4 billion last year.

Dung has already vowed to cut state spending by 10 percent in an effort to control prices, the official Vietnam News reported this week.

Pham Chi Lan, a former government adviser, said the 10 percent cut would not be enough because of inefficiency in the large state sector.

AFP