The government today announced a series of measures including capping fuel prices and road toll charges in an effort to contain inflation and keep economic growth on track in the face of rising fuel prices worldwide.

Recent oil price increases in the country had impacted the whole economy, with many traders raising prices of goods and services, causing a public outcry especially among the low income earners.

"To reduce the economic burden of low income earners, four immediate measures will be implemented," the prime minister's department said in a statement.

Firstly, Malaysia, a net oil exporter, will not raise fuel prices again until the end of 2005.

"The government will not increase petrol, diesel and cooking gas prices until year end," it said.

Good news for vehicle owners

To reduce the impact of rising business costs, the government will cut road tax by 25 percent for all businesses, effective Sept 12, and not allow highway operators to raise toll rates until the end of next year, it said.

School buses will have their road tax reduced to RM2 per year. At present, the rate is RM10 per year.

And as for private vehicle users, those with vehicles under 1000cc will only have to pay RM30 per year while those with vehicles with engine capacity between 1000cc and 1600cc will have the tax reduced by 50 percent.

Specifically, motocyclists driving machines of engine capacity 151-250cc would enjoy a 50 percent rebate in road tax. Motorcycles below 150cc do not pay road tax.

"We hope the twin measures of cutting road tax and maintaining toll prices will benefit both businesses and consumers," it said.

At the same time, it said it would also increase financial assistance to the needy and the aged so as to help them cope with rising costs.

Lid on inflation

Boon Leong, analyst with Hwang-DBS Vickers, told AFP he believed the measures announced by the government would help keep the lid on inflation.

"It will help keep inflation down. If prices go up, it will hurt economic growth," he said.

Boon Leong said that since Malaysia was counting on domestic- rather than export-driven economic growth, it had to ensure that domestic consumption would not be affected by rising prices.

"Higher inflation will hurt consumption especially among the lower income group. The measures announced by the government will help sustain consumption," he said.

Malaysia's growth slowed to 4.1 percent year-on-year in the three months to June from 5.8 percent in the first quarter, due to declines in the manufacturing and mining sectors, the central bank said last month.

Officials have up to now been optimistic that the country would meet this year's growth target of 5.0-6.0 percent but private sector analysts have been more cautious in the face of rising inflation.