IMF insists on Ukraine adjusting gas prices

"The commitment under the IMF-supported program is to adjust prices in line with the import price. The focus should be on this... The end objective should be to establish free market for gas. Until this is achieved, it is important to continue to adjust the price in line with the import price," he said.

According to him, market gas prices in the domestic market will stimulate the implementation of energy saving measures and promote the efficient allocation of resources.

Read alsoReuters Exclusive: IMF sees sizeable risks in Ukraine 2018 budget"It ensures that the gas sector is able to recover costs, and has resources to invest in gas infrastructure. It also provides incentives for new companies to enter the gas market, and for healthy competition. Having one price for gas for all users of gas also eliminates the scope for corruption," the IMF Representative said in a statement.

Assessing the changes in Ukraine’s gas market, Ljungman stated that the reform of energy prices is "one of the major achievements of the reform process in Ukraine in the recent years".

" It remains important to let gas prices be determined by the market and avoid the re-emergence of untargeted implicit subsidies.  It is important to note that under the current household support system, the poorest households are shielded from an increase in gas prices by utility subsidies," Ljungman said.

Read alsoUkraine repays almost $1.3 bln to IMF in 2017As UNIAN reported earlier, the IMF in March 2015 approved a four-year Extended Fund Facility (EFF) loan program for Ukraine under which $17.5 billion will be disbursed. Ukraine has already received four disbursements from the Fund to the tune of $8.7 billion.

According to a Memorandum between the IMF and Ukraine’s finance ministry, published early April, the government should is to gas prices in the domestic market every six months starting from April 1, 2017, so that its price remains at parity with the price of imported gas. It was assumed that such a mechanism would operate until gas tariffs were completely liberalized.

According to the current legislation, by October 1, 2017, the Cabinet of Ministers had to adjust (increase) gas prices for the population and heat generating companies, as the cost of gas rose in the European market. This was never done; moreover, Prime Minister Volodymyr Groysman repeatedly stated the lack of objective reasons for raising prices.

IMF deputy spokesman William Murray at a Washington briefing December 14 said that the Fund had not yet scheduled its mission’s arrival in Ukraine to review the cooperation program to subsequently decide on the allocation of another tranche, since the Ukrainian side had not fulfilled all conditions to complete such revision. The IMF also pointed out that Ukraine should pursue its pension reform, create an anti-corruption court and adopt new legislation on privatization.