KIEV, March 2 – The government failed to persuade the International Monetary Fund to postpone indefinitely a major increase in household natural gas prices next month, according to a memorandum obtained and published by a newspaper.

But the increase will be at 30% and will be spread over a two-month period, compared with an earlier demand from the IMF to hike the prices at least 50% on April 1, according to the memorandum published by DT.ua.

The memorandum is a setback for the government of President Viktor Yanukovych and comes despite repeated promises by Energy Minister Yuriy Boyko not to increase the gas prices.

Any significant hike in household gas prices represents a sensitive political issue that will most likely backfire against pro-governing parties at upcoming parliamentary elections.

The scheduled gas price hikes will most likely further erode popular support for Yanukovych’s Regions Party ahead of the October 2012 election. The party has been rapidly losing support over the past nine months.

The developments come as Ukraine is awaiting a decision by the IMF board of directors later this month over the release of $1.6 billion installment from $15.2 billion loan that had been earlier approved.

The failure to implement the agreed economic reforms, including the scheduled gas price hikes, may complicate or make impossible further release of the money.

First Deputy Prime Minister Andriy Kliuyev said in early February that the government in talks with the IMF will seek to postpone the gas price hike indefinitely.

Ukraine, bowing to the pressure from the IMF, has already increased the gas prices for households from August 1, 2010 by 50%, and the next round of price hike has been preliminary scheduled in April.

Former Prime Minister and now the leader of opposition, Yulia Tymoshenko, insisted that the authorities should postpone the price hike.

The IMF insisted on hiking the gas prices after the sector had been for years subsidized by the government, and by the state-owned energy company Naftogaz Ukrayiny.

Ukraine for years has been importing massive amounts of gas from Russia at market prices and then re-selling it to households at 80% discount as part of a social support program.

The situation led to serious financial problems at Naftogaz Ukrayiny as the company has been struggling with paying for Russian gas imports, triggering repeated bailout from the government. (sb/ez)