12:22 14.07.2018

Ukraine's govt continues forging compromise with IMF

4 min read
Ukraine's govt continues forging compromise with IMF

The Cabinet of Ministers of Ukraine continues negotiations with the International Monetary Fund (IMF) on the price of natural gas for the population and expects a compromise option, Ukrainian Prime Minister Volodymyr Groysman has said.

"We are conducting negotiations now. We are looking for compromise options, first of all, to protect the interests of Ukrainian citizens and Ukraine. I hope for understanding with our international partners," he said at the "hour of questions" at the Verkhovna Rada on Friday.

Groysman reminded that the government has been holding discussions for a year on the formation of gas prices for the population. He explained that gas for industry costs about UAH 10,000 now, whereas for the population the government imposed its restriction to UAH 7,000.

"We are talking about equalizing the price in Ukraine and making it unified. I strongly disagree with this. And for this reason we have been conducting a serious discussion with the IMF for a year. We are looking for the right approach now. But it is important not to make Ukrainians suffer from this. We need adequate compensators for this," the head of government said.

He stressed that the increase in gas prices could only be a forced step to prevent an economic catastrophe in the event of a default that could occur in the absence of international financing and the ability of Ukraine to service its external debts.

"I will ask for consultations with the faction leaders on this issue. And I will simply demonstrate two or three scenarios we might deal with," Groysman said.

The prime minister pointed out that Ukraine needs to attract about $5 billion annually to service the national debt.

"Over the next five years, we must return $33 billion. My strategy, as prime minister, and the government, and I am sure, of all parliamentarians', is to repay these debts and ensure faster economic growth," said Groysman.

According to him, default will lead to a sharp rise in prices, devaluation of income of Ukrainians. "In fact, all that we have accumulated: the dynamics, which will continue growing, it can all be reset, God forbid that, go negative," said the prime minister.

He stressed that the government and parliament should not allow such a tragic scenario, and if the international partners support us, the economic situation in the country will continue improving the next year.

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.

The Fund's position is quite tough, as the government last year decided to raise gas prices that allowed Ukraine to receive a tranche from the IMF, but subsequently unilaterally refused to implement it.

IMF Managing Director Christine Lagarde said on June 19, 2018 that the implementation of the precondition for gas prices is critical for the completion of the current revision of the IMF-supported program.

According to her, two other preconditions are the amendment to the law on the High Anti-Corruption Court (HACC) recently adopted and compliance with the state budget deficit.

On July 12 the Verkhovna Rada made the necessary amendments to the legislation on the HACC.

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