Ukraine should refrain from returning to control over gas prices, solve problem of imbalance in energy - IMF
The return to control over natural gas prices is not only an extremely ineffective way of subsidizing households, but also leads to abuse of resources due to corruption and curbing the implementation of energy efficiency, IMF Resident Representative in Ukraine Goesta Ljungman has said.
"There is - and there will be - a substantial part of the Ukrainian population who cannot cover the cost of gas, heat, hot water and electricity. The most efficient way to support those households is to identify them and provide them with financial support through the budget so that they can pay their utility bills. This instrument for support exists in the form of the Household Utility Subsidy program. We support this program," he said in an exclusive interview with Interfax-Ukraine.
"The other issue is structural – about what is the most efficient way organize the gas market. Since 2015, there has been a concerted effort to move towards an open and competitive gas market, both at the wholesale and retail levels. Important progress has been made, but a fully functioning market for household gas has not yet been established. Giving households the choice between a wide range of products - including fixed price contracts - is one of many developments that are needed," he added.
"I agree that financial imbalances in the electricity sector are a source of concern. But it may be worthwhile to separate the issue into two: the immediate financial imbalance on the one hand, and Ukraine's long-term energy security, on the other hand. It is obvious that there is an urgent need to identify additional financial resources for the electricity sector. The important part of this is that actual revenue sources are mobilized. Simply borrowing more is not a viable solution to current imbalances," he said.
"But there is also a broader issue of Ukraine's long-term electricity model. Ukraine currently relies on its legacy electricity production infrastructure, much of which dates back to Soviet times. Reorienting and modernizing electricity production is necessary and possible. But it requires planning to ensure that Ukraine can strengthen its energy supply and security," the expert noted.