Poverty will rise in Vietnam as a result of soaring inflation this year so the government must stay the course on price-busting policies, John Hendra, head of the United Nations mission in the country, said on Tuesday.

A UN study showed that poverty increased by 2.1 per cent after Vietnam’s last bout of high inflation in 2008.

That year, inflation peaked near 28 per cent in August. Last month, the annual rise in the consumer price index hit 17.5 per cent - its highest level since December 2008 - and it is still going up.

’It will increase the poverty rate. Whether that’s one or two percent, or more, we will see,’ Mr Hendra told reporters, noting that Vietnam had one of the top five inflation rates in the world. ’It’s a serious situation.’

Increases in the poverty rate run counter to the trend in Vietnam since economic reforms started to take root in the early 1990s.

Since then, the rate has fallen to around 10 per cent from nearly 60 per cent.

Since mid-February the authorities have adopted a raft of inflation-fighting measures, including raising interest rates several times, targeting lower credit growth and promising to cut public spending.