KUALA LUMPUR (AFP) - Malaysia has cut subsidies for fuel and sugar, a report said Saturday, in a bid to reduce its budget deficit by saving the government 1.18 billion ringgit (376 million dollars). The cuts will have an immediate affect, with fuel prices by five sen (1.6 cents) to 1.90 ringgit a litre for gasoline and 1.80 ringgit for diesel. Liquefied petroleum gas will rise five sen to 1.90 ringgit a kilogram. Sugar price will be hiked by 20 sen to 2.10 ringgit a kilogramme, in a move also seen as promoting healthier lifestyles. It is the second time in five months that the prices for these two key commodities were raised, and the increases come into effect as oil prices rose to their highest level in more than two years. New Yorks main contract, light sweet crude for January, gained 1.19 dollars to close at 89.19 dollars a barrel, its highest point since October 9, 2008. Idris Jala, minister in the prime ministers department, described the price increase as minimal and that it would result in a total savings of 1.18 billion ringgit. I believe people will be able to accept it, he was quoted as saying by the Star newspaper, adding that the savings would be used for infrastructure development. Wan Suhaimi Saidi, an economist with Kenanga Investment Bank, told AFP Saturday that a cut in the subsidy will reduce the governments operating expenditure as it aims to lower the budget deficit, he said. The government is eyeing a robust economic growth of up to 7.0 percent percent for 2010, after the economy contracted 1.7 percent last year. Analysts had previously said that price hikes of essential items will make voters unhappy and they may punish the ruling coalition in the polls. The opposition scored unprecedented gains in elections in 2008 which saw it claim five states and a third of parliamentary seats. The next election is not officially due until 2013 but pundits say it could be held early next year.