The increase, which took effect Thursday, takes fuel prices to record levels and follows a decision this week to raise electricity rates.

The price of gasoline was raised 18% to 19,300 dong (92.4 cents) per liter, said the official with state-owned Petrolimex, the country's biggest petroleum trader. The price of diesel was raised 24% to 18,300 dong per liter, while that of kerosene was raised 21% to 18,200 dong per liter, the official said.

Crude oil briefly hit $100 a barrel overnight Wednesday in New York, amid unrest in Libya that has disrupted oil supplies from the world's 15th largest exporter of crude. Thursday afternoon in Hanoi, crude was up 88 cents at $98.98 a barrel.

Muddled policy decisions in Vietnam have confounded economists worried about the lack of a clear direction for the economy. It continues to be blighted by surging inflation due to soaring commodities prices and a series of currency devaluations, as well as a hefty trade deficit thanks to sluggish exports and sharply rising imports.

Vietnam posted a 12.31% rise in its consumer-price index for February, compared with a 12.17% rise in January, confirming that officials haven't yet succeeded in cooling an economy that some believe may be overheating, in part because of excessive credit that officials poured into the economy after the global financial crisis to ensure the country didn't slip into recession.

Vietnam also suffers from a sizable trade deficit that has undermined confidence in the country's currency, the dong, and reduced its foreign-exchange reserves.

On Feb. 11, the State Bank of Vietnam devalued the dong by 8.5% against the dollar, the fourth devaluation in 14 months, even though that measure was expected to add even more inflation by making imported goods costlier. Since then, the government has raised some interest rates and promised to cut credit growth to slow the economy.

Economists warn the fuel price increases and a 15% rise 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 years old, 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 price rises, combined with the recent devaluation of the dong, would make it almost impossible for the government to curb inflation to under 7%, said economist Nguyen Minh Phong.

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

The Wall Street Journal - February 23, 2011