Argentine cuts heating gas subsidies in bid to shore up govt finances

BUENOS AIRES, March 27 Thu Mar 27, 2014 11:37am EDT

BUENOS AIRES, March 27 (Reuters) - Argentina said on Wednesday it will reduce the country's popular heating gas subsidies by 20 percent, a move aimed at shoring up strained government finances but that will put pressure on consumers already harried by one of the world's highest inflation rates.

Economy Minister Axel Kicillof said the money saved by the subsidy cut will go toward social spending. Argentina's loose fiscal policy is the driving force behind consumer price increases estimated by private analysts at over 30 percent.

Factories will not be affected by the subsidy cut, which will be aimed at homes and commercial businesses, Kicillof said.

"Those users who reduce their natural gas consumption by 20 percent will not have their subsidies cut," Kicillof said, adding that the measure was aimed at encouraging "responsible use of a scarce resource."

Argentina's finances are feeling the strain of the country having been cut off from the international capital markets since its 2002 sovereign bond default.

Moody's Investors Service cut Argentina's government bond rating further into junk earlier this month, saying a sharp drop in central bank dollar reserves has raised concern about the country's ability to service its remaining foreign debt.

Reserves are down 33 percent over the last year to $27.1 billion.

(Reporting by Alejandro Lifschitz, Jorge Otaola and Guido Nejamkis; editing by Andrew Hay)

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