Second Finance Minister Nor Mohamed Yakcop today warned that if world crude oil prices hit US$150 in the short-term it could impact on the country's projected budget deficit.

Nor Mohamed also said that Malaysia - a net oil exporter - will pay out RM5 billion in cash rebates to car owners this year to compensate for a recent fuel price hike.

nor mohamed yakcop Nor Mohamed said the rising oil price could force the government to review its targeted 3.1 percent deficit in the 2008 budget, which was based on oil prices averaging US$70 per barrel.

"It is possible for the oil price to reach US$150 dollars soon," he told the state Bernama news agency.

The government last week hiked the price of fuel by 41 percent, to rein in a spiralling subsidy bill. To ease the impact on motorists, it will give cash rebates of RM625 for owners of small- and medium-sized vehicles.

After a series of small street protests against the decision, and with activists planning a major rally next month, Nor Mohamed called on the opposition not to politicise the issue.

"Rising oil prices is a dilemma for the government which is why the people should have commonality in purpose, and join hands in overcoming the problem," he said.

The government this week announced a cost-cutting package to save RM2 billion, limiting official overseas trips, deferring purchases of assets, and cutting ministers' entertainment allowance.

-AFP