Chile's president defends power rate hike after five-year freeze

SANTIAGO (Reuters) - Chilean President Gabriel Boric pitched a decision to raise electricity rates over the next few months as a necessary if unpopular measure that will promote healthier public finances.

Power rates had been frozen since 2019, which has led to an accumulated debt of some $6.5 billion, Boric said in an interview on Thursday with Radio Presidente Ibanez, located in southern Chilean city of Punta Arenas.

"We have to make this adjustment, which is difficult (but) necessary," he said. He was not thinking of the next election, but instead about the sustainability of public finances, he added.

In April, Chilean lawmakers approved an electricity rate stabilization law to pay down accumulated debt, with the first rate hike set for July, rising to a 60% increase by 2025.

Earlier this month, the central bank cited the power rate hike for regulated consumers as a major factor in adding 1.45 percentage points to its estimate of inflation for the next 12 months.

Boric noted that around 1.5 million families benefit from power subsidies, and that he is working with legislators to expand the benefit.

"We're going to look for the best mechanisms, but I think it's also important to be very responsible, because for me the easiest thing would be to say it should be postponed and that the next government will pay for it," he said.

"But that would ultimately end up harming Chileans."

(Reporting by Fabian Andres Cambero; Editing by Peter Graff)

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