Hong Kong  - Hong Kong's inflation rate will more than double to an anticipated 4.5 per cent in 2008 because of higher food and fuel prices, a government minister said Wednesday.

Secretary for Development Carrie Lam told legislators the underlying inflation rate for the wealthy former British colony was forecast to be 4.5 per cent compared to just 2 per cent in 2007.

Prices in the city of 6.9 million have risen sharply in recent months, due in large part to the sharp price increases in mainland China where Hong Kong imports most of its food from.

The Chinese yuan has also appreciated against the Hong Kong dollar over the past year, making imports from China more costly.

"The short-term inflation outlook will hinge much on the movements of food prices in the international markets, which are expected to be volatile," Lam told legislators.

"In addition, the persistent high prices of crude oil and other commodities in the world markets, the weak US dollar, the appreciation of the yuan and the sustained strength of the local economy will continue to exert inflationary pressure."

Lam said the Sichuan earthquake last month might also have an impact on China's food supply chain and prices.

"The government will continue to monitor the situation closely and review the inflation forecasts," she said.

Hong Kong reverted to Chinese sovereignty in 1997 after 156 years as a British colony but maintains an autonomous political and economic system to mainland China and has its own currency. (dpa)