September 6, 2016 / 5:46 PM / 2 years ago

Argentina's top court gives go-ahead to electricity subsidy cut

BUENOS AIRES, Sept 6 (Reuters) - Argentina can go ahead with its plan to cut electricity subsidies, according to a Supreme Court ruling on Tuesday that bolstered President Mauricio Macri’s fiscal tightening push despite opposition from recession-racked utility users.

The decision was a much-needed win for the Macri administration after being caught out last month when the court shot down his plan for cutting home heating gas subsidies.

Tuesday’s ruling threw out a suspension of the electricity subsidy cut imposed by a lower court after a group of lawmakers filed a suit saying that Macri was burdening households already squeezed between high inflation and a shrinking economy.

Plaintiffs in the suit included the official Ombudsman of Argentina’s most populous province, Buenos Aires, and lawmakers.

But they lacked legal standing to bring the suit, according to a statement from Argentina’s official Judicial Information Center (CIJ). The plaintiffs “were not entitled to act on behalf of all users of electricity services in Buenos Aires,” the statement said.

The local stock market inched 0.7 percent higher to 16,069 after the ruling was announced. Shares of energy group Pampa Energia rose 4.5 percent, though traders said the decision did not spark a wider rally in the sector because the ruling had been widely expected and was built into prices.

Elected in November on promises of lifting the heavy market controls favored by the previous administration, Macri moved to slash utility subsidies early in his term. As a consequence, heating bills during a particularly cold Southern Hemisphere winter soared, prompting public protests.

Macri inherited a government nearly out of cash after eight years of free-spending populism under President Cristina Fernandez. He ditched currency and trade controls as part of his bid to draw investment to Latin America’s No. 3 economy.

But the recovery has taken longer than expected to manifest itself. Macri says he expects gross domestic product to grow at least 3.5 percent in 2017, while inflation will likely drop from around 40 percent currently to 17 percent next year.

Last month the Supreme Court said the government would have to hold public hearings before implementing heating gas subsidy cuts. Administration officials were expected to propose a gas subsidy cut that would cause average home heating bills to rise by about 200 percent.

“The average gas bill increase we originally applied was about 330 percent. Now the average increase will be more like 200 percent,” Energy Minister Juan Jose Aranguren told local radio.

Additional reporting by Eliana Raszewski; Editing by Alan Crosby

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