Global Biz

Vietnam hikes fuel prices by up to 24 percent

(Agencies)
Updated: 2011-02-24 14:37

HANOI, Vietnam - Vietnam raised fuel prices by up to 24 percent, adding to soaring inflation and causing gridlock in the capital Hanoi as motorists scrambled to fill their tanks before the hike took effect.

The increase announced Thursday takes fuel prices to record levels and follows a decision earlier this week to raise electricity rates. Vietnam has been grappling with high inflation as food costs jump. The consumer price index rose 12.2 percent from a year earlier in January.

Related readings:  China raises fuel prices by 4%  China raises retail fuel prices by 4%  High fuel prices cut SOEs' profits  Truckers protest against soaring fuel prices

Traffic jams choked busy roads in Hanoi as car drivers and motorcyclists rushed to fill up before the 10 am deadline when the price increase took effect.

The gasoline price was increased 17.5 percent to 19,300 dong (92 cents) per liter and the diesel price hiked by 24 percent to 18,300 dong (87 cents) per liter. Crude oil has surged to nearly $99 a barrel on the New York Mercantile Exchange amid unrest in Libya that has disrupted oil supplies from the world's 15th largest exporter of crude.

Economists warn the fuel price hikes and a 15 percent increase in electricity prices that will take effect March 1 will lower living standards and undermine the government's attempts to curb double-digit inflation.

"How could we survive with all of these price increases while our incomes remain the same?" said Nguyen Thanh Hoa, 36, a state employee with two children to feed and an unemployed husband. She was among those rushing to fill her motorbike at a gas station in central Hanoi.

The fuel and electricity hikes combined with the recent devaluation of Vietnam's currency, the dong, would make it almost impossible for the government to curb inflation to under 7 percent, said economist Nguyen Minh Phong.

"We have to prepare to see the annual inflation rate to double the government's target," he said.

Phong said the living standards of ordinary Vietnamese would suffer.

"State employees like me and farmers would be hardest hit," said Nguyen Hoai Anh, 45. "I would have to travel less by motorbike to save money," he said.