Washington/Tegucigalpa  - US Secretary of State Hillary Rodham Clinton has cut off aid to Honduras in the wake of the June 28 coup that toppled elected President Manuel Zelaya, the State Department said Thursday.

Zelaya praised the decision, while the post-coup government in Honduras accused Washington of "taking sides with Hugo Chavez," the left-wing Venezuelan president.

Clinton had temporarily suspended aid shortly after the military- backed coup, pending a review of the situation. Washington has criticized the government that replaced Zelaya for its unwillingness to accept a compromise outlined by Costa Rican President Oscar Arias.

After meeting with Clinton, Zelaya said in Washington that the US move was consistent with governments in Latin America and hailed the "unified positions" of leaders in the region.

In Tegucigalpa, the government set up after the coup said that any support for Zelaya is equivalent to backing Chavez's effort to broaden his area of influence in Latin America.

Rafael Pineda Ponce, Honduran government chief of staff, said that cuts would be made to government programmes to make up for the loss of US aid. Finance Minister Gabriela Nunez said plans to build a road linking the Pacific with the Atlantic would be suspended, and she claimed that around 20,000 peasants would be directly hurt by the US decision.

Clinton's move cuts off more than 30 million dollars in non- humanitarian aid to Honduras. It keeps in place 70 million dollars in humanitarian aid.

US law requires the termination of aid to countries where a military coup has taken place.

"Restoration of the terminated assistance will be predicated upon a return to democratic, constitutional governance in Honduras," State Department spokesman Ian Kelly said.

It was not clear whether Clinton's decision would affect more than 100 million dollars in aid to Honduras through the State Department's Millenium Challenge Corporation, which sign aid compacts with countries that demonstrate commitments to democratic and economic reform.

The US embassy in Tegucigalpa has stopped issuing most visas to Hondurans following the coup and moved to revoke visas already held by Honduran officials.

Roberto Micheletti, who has led the government since Zelaya's ouster, has refused to accept the Arias proposal. The so-called San Jose accord calls for Zelaya's immediate return to power while new elections would be moved up to October, one month earlier than scheduled.

Zelaya has accepted the San Jose Accord.

The government set up after the coup "is increasingly alone," Zelaya said.

He vowed to return to Honduras "sooner or later."

"My return is not negotiable. I am going to return to Honduras for good or ill, but I am going to return," he said.

Jose Miguel Insulza, secretary-general of the Organization of American States (OAS), said earlier Thursday in Buenos Aires that Honduras currently lacks "an adequate atmosphere for a fully democratic election."

He noted that it will be up to each OAS member country to decide whether or not to recognize the results of the election, scheduled since before Zelaya's ouster for November 29.

"Honduras has been suspended from the OAS, which is the sanction that we can impose upon it. There are no other sanctions. If countries decide not to back the election, they will not lift sanctions and Honduras will remain suspended," Insulza said.

US authorities anticipated that they would not back the November election.

"At this moment, we would not be able to support the outcome of the scheduled elections," Kelly said. "A positive conclusion of the Arias process would provide a sound basis for legitimate elections to proceed. We strongly urge all parties to the San Jose talks to move expeditiously to agreement." (dpa)