Sept. 9 (Bloomberg) -- Mexico will increase the price of gasoline sold by state-owned oil company Petroleos Mexicanos on a weekly basis until it reaches average international market rates in 2010, Finance Minister Agustin Carstens said.

Gasoline prices in Mexico will catch up with average market rates as the government gradually eliminates its subsidy, Carstens said in an interview on Televisa television today.

``We are proposing to reduce the subsidy to free the country's budget and to give a benefit to all the other sectors of the economy,'' Carstens said.

President Felipe Calderon's government increased the frequency and amount of gasoline price increases this year in a bid to curtail subsidies that have cut government revenue. Subsidies will fall 43 percent to 138 billion pesos ($13.1 billion) next year, Carstens said yesterday.

Lawmakers from the opposition Party of the Democratic Revolution criticized the government's gasoline plan, saying that it will further boost consumer prices. Mexico today reported its fastest annual inflation rate in more than five years.

``It's really unfortunate because it's affecting the poorest people in the country,'' legislator Alejandro Sanchez Camacho said about the gasoline price increases.

Pump Prices

A gallon of regular unleaded gasoline sold for $3.65 yesterday in the U.S., according to a survey by automotive club AAA. In the metropolitan Mexico City area, a gallon of regular unleaded gasoline cost 7.38 pesos a liter ($2.64 a gallon), according to Mexico's National Gas Station Retailer's Association.

Mexico has raised the price of regular unleaded by 5.3 percent since December, compared with a 20 percent increase in the U.S., according to AAA, the nation's biggest motoring group.

Pemex, as the Mexico City-based company is known, is the sole domestic distributor of gasoline. Mexico imports about 40 percent of the gasoline consumed in the country.

To contact the reporter on this story: Andres R. Martinez in Mexico City at amartinez28@bloomberg.net; Jens Erik Gould in Mexico City at jgould9@bloomberg.net;

Last Updated: September 9, 2008 16:56 EDT