Key measures to reform energy sector expected at post-war stage of EFF program – Fund rep
The new EFF extended financing program, like previous programs of cooperation with the International Monetary Fund (IMF), will focus on reforms and activities in the energy sector, but it is expected that the main reform measures will be determined in the second stage of the program after the end of the war, International Monetary Fund Resident Representative in Ukraine Vahram Stepanyan has said.
"The authorities have expressed a commitment to implementing a timely and ambitious reform agenda aimed at tackling the longstanding structural challenges in the energy sector that have been compounded by the war. They are cognizant that this will involve restoring and enhancing competition in wholesale and retail gas markets," he said in an interview with Interfax-Ukraine.
Stepanyan noted that ensuring the sustainability of the system and reducing quasi-fiscal obligations would require a gradual increase in energy tariffs to ensure cost recovery. At the same time, it will be important to allocate sufficient and targeted resources to protect vulnerable households, he added.
Commenting on the UAH 60 billion funding cap from the budget for special obligations of state energy companies to supply the population with cheap energy resources contained in the program, the IMF representative clarified that this is not a rigid cap which would limit the authorities' ability to use public money to import gas if an acute need arose.
"This number should be viewed as an adjustor to the fiscal balance target that would give the authorities space to accommodate potential spending pressures including from gas purchases or PSO compensation, but conditional upon availability of financing," Stepanyan noted.
As reported, in early April, the Ministry of Finance sent the government a letter on the fiscal risks of the state budget, a copy of which is at the disposal of the agency, according to which Naftogaz, in the draft financial plan for 2023, planned to receive UAH 327.1 billion from the state budget to compensate for PSO (including UAH 116.5 billion for 2022). The Ministry of Finance provided the Ministry of Energy with its comments on prices and insists on the need to make calculations solely on the basis of the expenditures of natural gas market entities verified by the State Audit Service.
