With an International Monetary Fund mission due to visit Kyiv in just over a week, the Ukrainian government has decided not to raise gas tariffs for households – delaying for another month the fulfillment of one of Ukraine’s commitments to the fund.
At a meeting on Aug. 29, the Cabinet of Ministers of Ukraine extended until the end of September its decree on selling gas to the population at subsidized prices.
The IMF mission is to arrive in Ukraine on Sept. 6 to assess Ukraine’s progress in reforms.
Raising gas prices to market levels was one of Kyiv’s commitments to the fund, given in exchange for a promised IMF loan package of $17.5 billion.
However, only around half of the sum has actually been disbursed due to Ukraine’s delays in implementing reforms. The loan program is due to expire in March.
“Talks with the IMF over raising gas tariffs to the level of import parity are continuing,” Interfax reported, citing the explanatory note to the decision.
“Therefore, considering that the validity of the (gas subsidy) decree had expired, there was a need to prolong it.”
First adopted in March 2017 for one year, the decree was prolonged until the end of August 2018, despite the IMF’s demand to increase gas prices for households to market levels as a condition of Ukraine receiving the next tranche of $1.9 billion of reform assistance. Ukraine has only received $8.4 billion so far.
The gas price hike is a difficult move from the government’s point of view, especially prior to winter and the presidential elections next spring. Last week, however, Prime Minister Volodymyr Groysman conceded that it was necessary: Ukraine’s budget is in need of money to buy gas for the heating season and to make $6 billion in external debt repayments by the end of 2019.
