Our analysis based on detailed Vietnamese data sets shows that the magnitude of the fossil-fuel price
impact can be substantial in Viet Nam, with a 20 percent increase in both petroleum and electricity
prices raising Consumer Price Index by maximum 4.0 percent. Higher inflation rate is found in urban
areas compared to rural ones (4.3 percent vs. 3.8 percent). More than half of this comes from the
indirect effect of fossil-fuel price changes on prices of other goods and services consumed by
households, especially in rural areas and in case electricity prices rise. We employ a static inputoutput
model to estimate inflation. Although the poorer face a smaller impact in absolute term than the
richer do, they are more affected indirectly in both absolute and relative terms because of their higher
price pass-through from fuel and electricity particularly to food and foodstuff. Particularly, about threequarters
of the inflationary impact faced by the rural poorest 10 percent come indirectly. This analysis
was also conducted to determine which households would be most affected by higher energy tariffs
and to what extent mitigation measures, such as lifeline tariffs or direct cash transfers, might lessen
the impact for poor and vulnerable households.