Bulgaria approves $1.1 bln plan to curb energy prices, help households

SOFIA, May 18 (Reuters) - Bulgaria unveiled a hefty package of measures on Wednesday aimed at shielding companies and low-income consumers from the surge in energy and food prices caused by the Ukraine conflict, Prime Minister Kiril Petkov said.

The package agreed by the ruling centrist coalition will deploy 2 billion levs ($1.08 billion) of stimulus, ranging from cutting taxes on bread and heating and a discount on motor fuels to raising state pensions and tax benefits for young families.

The new outlay comes on top of other measures that kept electricity prices for households unchanged since last July and compensations for businesses for high energy costs.

"The measures are an opportunity to support the most vulnerable, who are at the biggest risk from the impact of inflation ... and offer specific focus on the fuels and energy," Petkov told reporters

"The package guarantees that the standard of living of all Bulgarians will be maintained," he said.

Under the plan, the European Union's poorest member country will raise state pensions by an average of about 20%, increase tax benefits for young parents, scrap value added tax on bread and cut the tax on heating and natural gas for households to 9% for a year from July.

The government will also offer a discount of 0.25 levs per litre of petrol, diesel and liquefied petroleum gas and methane from July until the end of the year and scrap excise duties on natural gas, electricity and methane.

Transport companies have been demanding urgent measures to offset high fuel costs. Inflation hit 14.4% in April, its highest since 2008.

Bulgaria, which saw its natural gas supplies cut by Russia at the end of April for refusing to pay in roubles, has rushed to replace them with U.S. liquefied natural gas and increased shipments from Azerbaijan.

It has argued that the natural gas prices will be cheaper than those of Russia's Gazprom and has asked for an exemption from any European Union embargo on Russian oil.

The stimulus package is not expected to push up the budget deficit target of 4% of economic output this year and will be financed by increased tax revenues, officials said.

The package will be partially funded by taxing the "extra" profits of energy firms due to surging oil and gas prices.

The exact calculations will be determined in a review of the state budget in July, Finance Minister Assen Vassilev said. ($1 = 1.8602 leva)
Reporting by Tsvetelia Tsolova, Editing by Louise Heavens, Robert Birsel

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