7 November 2011
The International Monetary Fund decided to take a pause in its Ukraine review to clear technical issues with Ukrainian authorities, the IMF country representative said in a statement released on Friday. Ukraine’s Prime Minister Mykola Azarov, in separate comments, said government planned to restart talks with the IMF only after ongoing negotiations with Russia on getting a reduced gas import price are completed. Svetlana Rekrut: The government’s reluctance to raise household gas prices and heating tariffs to reduce Naftogaz deficit remains a stumbling block in restarting Ukraine’s cooperation with the IMF. The government now hopes to reach a new gas deal with Russia in the coming weeks that may see lower gas prices for Ukraine. While lower import gas prices would alleviate much of the Naftogaz financial shortfall, the IMF’s position on gas tariff hike is likely to remain unchanged. We think the chances are high of a compromise between the government and the IMF on a one-off household gas price increase of 10-15% (vs. 30% currently advocated by the fund) by yearend, which could unlock Ukraine’s USD 15.6 bln standby loan program as of the beginning of 2012.