Luanda:  Angolan authorities cut gasoline and diesel subsidies on Wednesday as a prelude to liberalising the country's downstream oil sector, triggering a steep rise in pump prices and the threat of protests from irate motorists.

The cut means a litre of gasoline will cost 60 kwanzas, a rise of 50 percent, and diesel increase by 38 percent to 40 kwanzas, state-owned oil firm Sonangol said in a statement on Wednesday.

The state aims to trim annual fuel subsidies, currently around 440 billion kwanzas, by an average 20 percent each year, the Economy Ministry said in a separate statement. The money saved will be used to improve living standards in Angola.

Analysts say higher fuel prices may well lead to unrest as many Angolan motorists viewed the subsidies as one of the few benefits of living in what is one of Africa's top oil producing countries.

"These measures are never easy and there may be some protests from taxi drivers and unhappy car owners," said Alves da Rocha, an economist at Luanda's Catholic University.

"But the government needs to carry out these measures and hopefully use the money saved on the subsidies for other much-needed measures like building new homes for the poor."

In Mozambique, also a former Portuguese colony, rising food prices led to widespread protests in the capital Maputo where at least eight people have died, sources told Reuters.

But in Angola's capital Luanda, drivers used the occasional honk to protest against the increase in gasoline prices and taxi drivers in 14-seater Toyota minivans, which provide the only means of transportation for ordinary Angolans, said they were still thinking how to react.

"I don't know what we will do. My boss said he is likely to increase taxi fares on Monday," said Pedro, a taxi driver in Luanda.

Carlos Panzo, a spokesman for Angola's Economy Ministry said higher gasoline prices are likely to bolster inflation in the short-term. Inflation edged lower to 13.70 percent year on year in July from 13.74 percent in the previous month.

The move to cut back on subsidies is also the first step in plans to open up Angola's oil refining, storage, transportation and distribution businesses -- all currently held as a monopoly by Sonangol -- to competition from foreign firms.

The aim is to end gasoline subsidies altogether once the downstream oil market is fully liberalised.

Angola's single 37,500 barrels per day refinery covers only 30 percent of domestic needs, Oil Minister Jose Botelho de Vasconcelos said on Aug 10. A new $8 billion refinery in the port city of Lobito is expected to be ready by 2014.

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