Malaysia's government on Friday said it will cut retail gasoline prices 5.6 percent to help curb inflation, which soared to 8.5 percent in July, the highest level in decades.
The pump price of gasoline will come down to 2.55 ringgit a liter (US$2.92 a gallon) from 2.70 ringgit (US$3.12 a gallon) from Saturday, Prime Minister Abdullah Ahmad Badawi announced. Diesel price will be reduced to 2.50 ringgit a liter (US$2.89 a gallon) from 2.58 ringgit (US$2.96 a gallon).
The announcement came as a surprise since Abdullah had said earlier that pump prices will be reduced only at the end of the month, and only if global crude oil prices continue to fall.
"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.
This is the first price cut since the government hiked gasoline prices a stunning 41 percent and diesel by 63 percent in early June to curb a runaway subsidy bill. The price cut is aimed partly at curbing public frustrations over soaring inflation and will relieve pressure on the central bank from having to raise interest rates.
With the reduction, the government is giving a public subsidy of 30 sen (9 cents) per liter on gasoline and 50 cents (15 cents) on diesel, he said in a statement.
The Statistics Department said consumer prices in July rose 8.5 percent compared to the same month in 2007, up from 7.7 percent in July, due largely to higher electricity tariffs and the knock-on effect from June's fuel price hike.
Subsidies have kept the price of fuel in Malaysia _ a net exporter of oil _ among the lowest in Southeast Asia. But the government has said it cannot afford to fund overly high subsidies.
Friday's decision comes ahead of a parliamentary by-election on Tuesday in which Abdullah's ruling coalition is facing a tough battle from opposition leader Anwar Ibrahim, who is expected to win easily.
Anwar's three-party alliance won an unprecedented 82 of Parliament's 222 seats in March general elections. Anwar has vowed to topple the government by Sept. 16.