Mahathir, who took over the finance ministry after sacking his deputy Anwar Ibrahim in September, on Friday unveiled a 1999 budget which rejects austerity measures prescribed elsewhere by the International Monetary Fund (IMF).

In a populist stroke he announced an income-tax exemption for 1999--in reality an adjustment of the tax base year with no revenue loss for the government -- and other forms of financial relief to stimulate demand. He raised "sin taxes" on tobacco, liquor and gambling.

The 1999 budget of 65.095 billion ringgit (17.13 billion dollars) is down 9.3 percent from a year earlier but with a larger deficit of 16.635 billion ringgit to finance infrastructure and other pump-priming projects.

A newly set-up agency will acquire up to eight billion ringgit ofnon-performing loans from 21 financial institutions banks will be recapitalised, corporate debts restructured and business costs lowered.From January, one Saturday a month will be declared a day off for civil servants who currently work a half-day every Saturday. This is aimed at stimulating local spending and reducing operating costs for the bureaucracy.

Mahathir, who blames financial speculators for his country's woes since mid-1997, last month set a fixed exchange rate of 3.80 ringgit per dollar.

Malaysian police intensify crackdown as protesters fight back: Malaysian police clashed with defiant supporters of detained former deputy premier Anwar Ibrahim here on Saturday and arrested up to 300 people, witnesses and human rights activists said.

In the main clash, police armed with water cannons, tear gas and shields broke up an illegal afternoon rally of about 1,000 people in a popular shopping belt in downtown city.

Hours later, police shut down a forum calling for an end to the draconianInternal Security Act (ISA) allowing for detention without trial, and engaged in street skirmishes with the protesters.

Officers on the scene said protesters were fighting back with rocks in the streets and alleys around a mosque in Kampong Bharu district, where about 30 police trucks arrived to quell the disturbance.

``It is violent. It is organised. If not, it won't last so long. There are so many lanes and back lanes. They are playing a hit and run game,'' said a senior police officer.

Elizabeth Wong, spokeswoman of the human rights group Suaram, said 200 to 300 people were believed to have been rounded up by police during the day after demonstrators defied warnings against illegal assemblies.

A leading Malaysian human rights group demanded prime minister Mahathir Mohamad's resignation following violence triggered by a crackdown on demonstrators calling for reform.

``The prime minister, who is also home minister, must accept full responsibility for having totally mishandled the situation,'' saida statement issued by the Suara Rakyat Malaysia (Suaram).

``He cannot ignore the legitimate discontent of the people. We call upon the prime minister to immediately resign so that a general election may be held,'' it added after overnight violence between police and protesters.Unrest broke out in Malaysia in early September after Mahathir, in power since 1981, sacked his deputy prime minister and finance minister Anwar Ibrahim and had him arrested under internal security laws.

Anwar, once seen as Mahathir's political heir, has been charged with 10 counts of corruption and sexual misconduct, which he denies. He is to be tried from November 2 on four of the charges.

Apart from being responsible for police as home minister, Mahathir has also taken over the finance ministry from Anwar.

Anwar supporters have been holding weekly protests, which erupted into violence yesterday when police armed with water cannon and tear gas broke up an illegal assembly at a downtown shopping area. The move was followed byhours of street skirmishes in a mainly Muslim neighbourhood in which protesters threw rocks and petrol bombs.