IMF, Ukraine stuck on gas pricing issue, media report

The IMF is refusing to allow the Ukrainian government
to change its natural gas pricing approach for households that they had agreed
upon in March 2017, the ukranews.com news site reported on Oct. 18, citing
anonymous sources close to the talks. “For the IMF, this is a principal
issue,” the source said. “They do not want to make any changes
retroactively.” The impasse could delay the next IMF tranche for Ukraine
until mid-spring 2018, the news site said.

Recall, the Ukrainian government is trying to amend its resolutionadopted in March and agreed upon with the IMF. The initial resolution foresees
the adjustment of gas prices for households for October 2017-April 2018 based
on the import parity principle, which would require a price hike by 18-19%.

Ukraine’s Finance Minister Oleksandr Danyliuk said he
discussed the gas price hike with the IMF officials this weekend, only to report “some progress”in the talks in his comment on Oct. 15.

Alexander Paraschiy: Indeed, a
commitment to a semi-annual adjustment of gas prices based on the import parity
principle was on a list the IMF’s list of “prior actions” that had been “met”
by Ukraine, according to its April memorandum. That commitment, among others,
had enabled Ukraine to receive a USD 1 bln IMF tranche in April. Now Ukrainian
officials are trying to back out of this commitment, which is disturbing IMF
officials. But, in our view, there is still room for compromise, provided that
Ukraine addresses other remaining issues.

What ukranews.com reported about the talks does not
differ much from what was said by Danyliuk, who sees the glass as half-full.
Though there’s a risk of a delay with the IMF’s next tranche, we are keeping
its arrival this year as our base-case scenario.