Ukrainians To Pay 50 Percent More For Gas Under IMF Bailout Package
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Ukraine will raise domestic gas prices by as much as 50 percent starting from May 1, said the government on Wednesday, in order to meet a key loan condition set by the IMF for an expedited $15 billion bailout.
According to AFP, the IMF had made it clear to Ukraine’s new leaders during meetings in Kiev that an immediate end to Ukraine’s costly gas subsidies was one of its prime conditions to approve the bailout package.
Ukraine will raise domestic gas prices by as much as 50 percent starting from May 1, said the government on Wednesday, in order to meet a key loan condition set by the IMF for an expedited $15 billion bailout.
According to AFP, the IMF had made it clear to Ukraine’s new leaders during meetings in Kiev that an immediate end to Ukraine’s costly gas subsidies was one of its prime conditions to approve the bailout package.
The IMF also stated that it wants the Ukrainian central bank to stop propping up the currency and for the government to cut down on corruption and red tape.
“Yesterday, the Cabinet of Ministers made a decision to raise tariffs, said Yuri Kolbushkin, a senior official at Naftogaz, Ukraine’s state gas company, to reporters.
“There will be a timetable of tariffs until 2018. For the population, the rise will be more than 50 percent from May 1. For utilities it will be a rise of 40 percent from July 1,” he said.
Naftogaz would still be running a deficit of 80 billion hryvnia (8 billion dollars) this year even after the planned rises had come into force, officials said.
The IMF also claimed that the country’s energy subsidies ate up to 7.5 percent of Ukraine’s GDP a year.
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Kiev desperately needs cash to cover expenses and avert a possible debt default. The country’s finance minister has predicted the economy would contract 3 percent this year, weakened by years of mismanagement and the recent political turmoil.
The Financial Times reported that the IMF bailout package could be finalised as early as Thursday. The EU has also pledged to send an additional $2.2 billion in aid to Kiev once the bailout package has been approved, while the U.S. has pledged $1 billion and Japan another $1.5 billion.
“Ukraine needs the money and the west is eager to demonstrate support,” said Mujtaba Rahman, head of European analysis at the Eurasia Group risk consultancy.
[quote]“All parties have an incentive to finalise and disburse quickly rather than wait until after May’s presidential elections.”[/quote]
