Ukraine seeks to secure gas compromise with IMF to avoid price rises

Ukraine seeks to secure gas compromise with IMF to avoid price rises
With elections scheduled for 2019, Ukrainian Prime Minister Volodymyr Groysman wants to avoid an unpopular increase in gas prices just when residents are turning on their heating
By bne IntelliNews October 30, 2017

Ukraine will resolve the gas price formula issue with the International Monetary Fund (IMF) within the next two weeks, the country's Finance Minister Oleksandr Danylyuk told reporters at a press conference in Kyiv on October 26.

The statement followed October's Reuters report which said that Ukraine intends to make new pricing proposals to the IMF that would leave gas prices unchanged until July 2018, in breach with the earlier IMF deal.

Earlier, Ukrainian Prime Minister Volodymyr Groysman voiced his opposition to raising gas prices and the government is currently seeking to revise its pricing methodology for gas to avoid any increase. The government has half an eye on the spring 2019 presidential elections and so is reluctant to impose an unpopular price increase just as the winter heating season starts. 

The government was supposed to have increased prices at the beginning of October, when the heating season started, based on a rule that increases are imposed if the calculated price exceeds the existing one by 10% or more. If implemented, this would raise retail gas prices by 18%-19%. A new methodology has yet to be agreed with the IMF, which insists upon an import parity principle.

Ukraine is in a "comfortable position" with its external debt after the Eurobond placement, Danylyuk added, according to Bloomberg.

The minister also believes that "it is not a problem" if Ukraine gets a new IMF tranche in early 2018, although Danylyuk still expects it by year-end. The same day, the National Bank of Ukraine (NBU) said that the regulator expects the new IMF loan tranche – a $17.5bn support package – in the first quarter of 2018.

The greenlighting of pension reform and creation of a specialised anti-corruption court are among the steps that are before further IMF funding is granted.

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