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IMF worried about Ukraine’s gas price cut
Journal Staff Report

KYIV, Jan 14 – The International Monetary Fund has expressed concerns over Ukraine’s plans to cut natural gas prices for households and has already contacted senior government officials about that, Finance Minister Serhiy Marchenko said Thursday.

“They already have a reaction,” Marchenko told Ukrainian Radio NV. “They are concerned that we are reviewing some of our previous commitments. The question now is whether this could be part of a mechanism or a temporary solution.”

IMF officials could not immediately be reached for comment.

The government plans to cut gas prices by 30% this month and to introduce state control over the energy sector, a move that directly contradicts Ukraine’s previous commitments. Prime Minister Denys Shmyhal said the price cut was due to ongoing coronavirus pandemic.

Acting Energy Minister Yuriy Vitrenko has been urgently handling talks with the IMF on the issue of gas price cut, Marchenko said.

“Yesterday, by the way, he had a call from the IMF,” Marchenko said. “I think that relevant consultations will also be held today.”

“We are urgently solving the problem that has suddenly emerged,” Marchenko said.

Ukraine’s natural gas industry was one of the most corrupt sectors of the economy before the government started to liberalize the sector in 2015. Existence of two sets of prices – market price and price set by the government – creates ample opportunities for corruption.

The government on Wednesday agreed to set the gas price at 6,999 hryvnias per 1,000 cubic meters, Shmyhal said, down from about 10,000 hryvnias/1,000 cu m that regional gas companies have been charging households in January.

“If we do nothing, the price would have increased to 12,000/1,000 cu m or even more next month,” Shmyhal said Wednesday, adding the government will monitor gas distribution companies to make sure that the prices at the level set by the government.

It was the pressure from the IMF that has forced Ukraine to start energy sector deregulation in 2015 in exchange for $17.5 billion bailout package.

The IMF insisted on hiking the natural gas tariffs, bank restructuring, reforming governance of state-owned enterprises and anti-corruption measures among other things for Ukraine to get the loan. At the time, state-set gas price was 20% lower than the market price.

Vitrenko said Wednesday that Ukrainians will pay much less for gas starting from February 1. (tl/ez)




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