Page 14 - FSUOGM Week 03 2021

FSUOGM POLICY FSUOGM

Kyiv to cap gas price for households,

jeopardising IMF deal

UKRAINE THE Ukrainian government will cap natural gas given the pandemic,” President Volodymyr
price for households in a move that may further Zelenskiy said in a separate statement on his
Gas price reforms are jeopardise the country’s co-operation with the website. Prices will be reduced by 30%, he
widely resented by the International Monetary Fund (IMF), Bloomberg added.
population. reported on January 13. The move is designed to shore up Zelenskiy's
Increasing gas prices on the domestic market, popularity, which has been waning in the last
especially to retail customers, was a key demand year as he fails to deliver on most of his campaign
of the IMF; however, after promising the reform promises to end the war in the east and stamp out
the government reneged on its promises several corruption amongst other things.
times in the past. The IMF has de facto suspended Ukraine’s
As a legacy of Soviet days, when the state $5bn stand-by agreement (SBA) after the Con-
provided utilities, essential services and par- stitutional Court nixed a raft of reform laws that
ticularly heating, for free, introducing a cost has were put in place at the IMF’s insistence. Ukraine
been a painful reform, as it is widely resented by received the first $2.1bn tranche in June but sec-
the population that views free heating as a right ond $700mn tranche due in the autumn never
rather than a necessity. appeared.
However, the increasingly cash-strapped gov- In the first week of this year the IMF prom-
ernment finally bit the bullet and put the reform ised to send a new assessment team, which is a
through, transforming the natural gas company pre-requisite for a new tranche, but analysts are
Naftogaz from a huge drain on the budget to the not expecting the SBA programme to resume
biggest tax payer in the country. until the summer.
Naftogaz Group paid UAH141.5bn ($5.08bn) Tim Ash, senior sovereign strategist at
to the state and local budgets in January-De- BlueBay Asset Management, speculated that
cember 2020. This includes part of the divi- Ukraine’s oligarchs are behind the move as part
dends for 2019 – UAH39.6bn – as well as taxes of an effort to end the inconvenient relations
and payments arising from Ukrnafta's tax debt with the IMF.
settlement. “Thinking aloud here, but I think Ukraine’s
Revenues from Naftogaz Group exceeded old corrupt elites are once again using the gas
13% of total state budget revenues in Janu- price card to scupper the IMF programme.
ary-December 2020. Naftogaz Group remains Why might you ask?” Ash said in an email to
Ukraine’s biggest taxpayer. In 2019, Naftogaz clients. “Because they don’t want to adopt all the
Group’s tax and dividend payments to budgets anti-corruption legislation the Fund are asking
of all levels totalled nearly UAH121.4bn. them to re-introduce – the stuff around asset
Now the government seems to be back-track- declarations and the National Anti-Corruption
ing again and will cut gas prices below market Bureau of Ukraine (NABU). And they think by
from February until restrictions linked to the creating a fight with the Fund over energy pric-
coronavirus (COVID-19) pandemic are lifted or ing they will win popular support and then can
until this heating season ends, Prime Minister pretend that the break with the Fund is about
Denys Shmyhal told a weekly Cabinet meeting energy prices and fighting poverty rather than
broadcast online. really about their unwillingness to fight corrup-
“Market prices are too high today, especially tion.” ™

P14 www. NEWSBASE .com Week 03 20•January•2021