10:04 05.07.2018

Ukrainian PM proposes new option of compromise for gas prices to IMF

3 min read
Ukrainian PM proposes new option of compromise for gas prices to IMF

 Ukrainian Prime Minister Volodymyr Groysman has proposed to the International Monetary Fund (IMF) a new option of a compromise in the negotiations about gas prices, which envisages a package of steps, including monetization of subsidies, liberalization of the gas market and a discount from the single price of gas for ordinary consumers, a source close to the Ukrainian government has told Interfax-Ukraine.

"The government is now waiting for the IMF's reaction to this option. In the opinion of experts, if a compromise is finally achieved, it will be a victory thanks to the Prime Minister's principled negotiating position and flexibility in the search for options for its implementation," the source said.

The source recalled that since July 2017, Ukraine has been in a complicated negotiating process with the IMF on the gas issue: the Fund insists on raising the price of gas for households, which, according to various estimates, can range from 30% to 60%, due to rising prices on international markets, while the prime minister sees this sharp increase as unjustified.

The source said that during this period Ukraine offered the IMF at least eight options of changing the formula for gas prices, based on observance of the principles agreed upon with the Fund in due time: promoting the development of a free gas market and preventing the restoration of corruption schemes on the difference in gas prices, which flourished until 2016.

"However, in those options offered by the government it is taken into account that the price increase, on which the IMF insists, is unaffordable for ordinary citizens," the source said.

According to him, the government agreed to discuss an insignificant quarterly increase in the price of gas, which would not greatly affect the payments of citizens, and for the most vulnerable ones it would not be tangible at all through the mechanism of subsidies.

It was also proposed to equalize the price of gas for households and industry, but set a so-called "preferential" price for households for a certain social volume of gas consumption or to postpone the price increase, the source said.

The source added that among the good options was also the proposal to subtract the price of gas transportation and to focus on Hub0 in the pricing of Ukrainian gas, while Hub+ should apply only for imported gas.

"However, the IMF does not agree to either of these options and continues to issue an ultimatum to Ukraine: either an increase in the price of gas, or a refusal to provide the next tranche, which is needed first of all to ensure the timely repayment of external debts. The refusal to service external debt threatens Ukraine with the undermining of international reputation and a tangible economic crisis," the source said.

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