(AP)-Inflation is soaring in Cambodia but the Phnom Penh regime has been reluctant

to take strict remedies because it fears losing popular support before next year's

general election.

Consumer prices rose 130 percent from January to August, said UNTAC officials. The

Cambodian riel, which traded at about 550 for one U.S. dollar last December, has

fallen to about 2,000.

A major cause of inflation, which has been severely hurting people on fixed salaries,

has been the government's printing of new money to finance its U.S. $40 million budget

deficit. For months, U.N. officials have urged that this practice be halted.

Premier Hun Sen said that this month his government will finally stop mass minting

and try to cover expenses by new measures, including taxing foreigners living in

hotels. Unnecessary expenditures such as construction of government buildings also

will be halted, he said in an interview.

"I consider myself sitting on a volcano," he said. "If it erupts,

I consider that the end of me."

"If this government came to collapse because of economic problems, the whole

U.N. program would collapse," Hun Sen said.

Hun Sen's refused to raise taxes or cut government staff, insisting he could not

hurt Cambodians, who already are living hand-to-mouth in one of the world's poorest

countries.

Hun Sen said he could not cut government salaries because they amount to only 40,000

riels (about U.S. $20) a month-enough for two cartons of cigarettes.

Hun Sen had been hoping for foreign budget support. But the Khmer Rouge guerrilla

group successfully lobbied against that, saying it would be unfair to Cambodia's

three other factions.

Hun Sen said the Khmer Rouge's refusal to disarm despite the peace pact has forced

him to keep his 120,000 soldiers on a payroll already burdened by 145,000 civil servants.

Roger Lawrence, the senior U.N. economic advisor in Phnom Penh, had recommended that

the government impose taxes and cut expenditures to finance its budget deficit.

But he admitted that would be tough.

"The Phnom Penh administration is between a stone and a very, very hard place,"

he said. "They have already cut their expenditures very much to the bone and

all that's left are salaries for civil servants and the military."

Lawrence said the inflation has not hurt farmers and shopkeepers because they simply

raise their prices. But, he said, civil servants, soldiers and many city residents-all

on set salaries-are hurting.

"The price of goods in the market is increasing much faster than my salary,"

said Sam Ley, a 30-year-old soldier with a wife and four children. "We have

no hope it will improve."