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Eastern Europe
July 13, 2018 www.intellinews.com I Page 18
Kyiv has a week to do a deal with the IMF or risk no donor money until end-2019
Sergei Kuznetsov in Kyiv
Ukraine has about a week left to placate its main international donor the International Monetary Fund (IMF) and persuade it to release another badly needed tranche of money or risk not being able to get anything from any of its donors until the end of 2019, say analysts in Kyiv.
The Ukrainian government is continuing nego- tiations with the Fund on revising natural gas prices for households, Prime Minister Volodymyr Groysman said on June 6, but the talks have been bogged down for months.
Groysman admitted that he is not willing to hike gas prices, and would even like to reduce them, but he has to "consider such factors, as the need to make budget payments, service state debt and develop the economy," according to Interfax news agency.
Increasing domestic gas tariffs was the key element in Kyiv’s deal with the IMF, but having promised a hefty increase, the government reneged as last year’s heating season got under way. One of the perks of the Soviet Union was free power and heat in the icy winters so making people pay for utilities is politically very painful in all the countries of Eastern Europe.
In April, the IMF urged Ukraine raise prices. “We are concerned that energy prices again have become a political issue, and we think that it is critically important that Ukraine return to this policy of depoliticising decision making regarding energy prices," the IMF's European department director Paul Thomsen told journalists.
Ukrainian President Petro Poroshenko with IMF director Christine Lagrande.
"Now we are working with the IMF and our partners, and are discussing possible approaches to resolve the issue," Groysman told the nation's lawmakers, adding that he will inform them about progress as soon as it is reached.
Local analysts point out that Ukrainian officials are running out of time to implement minimum IMF demands for a new $1bn tranche from a $17.5bn support programme agreed with the multinational lender in 2015.
Alongside the gas price hike, two other require- ments are being demanded by the IMF —
the nation's parliament should secure amend- ments to the law necessary to create an anti- corruption court in the country, and the finance ministry should take measures to ensure that the 2018 budget deficit will not exceed the planned level.
"Failure to implement all three items [demanded by the IMF] by the end of this week will make it practically impossible for the IMF board to ap- prove the fifth loans tranche by its August recess," Alexander Paraschiy at Kyiv-based brokerage Concorde Capital wrote in a note on June 9. "That means the tranche can be considered by the board only in September, at the earliest."
However, by that time, the IMF is likely to add a new requirement, as tradition: a 2019 Ukrainian state budget with a deficit in line with IMF com- mitments (the budgeting process starts in early September), Paraschiy believes.