Ukraine again postpones natural gas price hike to late October

Ukraine’s Cabinet of Ministers has again decided to
extend current natural gas rates for households and heating utilities beyond Oct. 18, the deadline that had been set in late September. In
particular, at its Oct. 17 meeting, the government extended the regulated rates
under the so-called public service obligations (PSOs) to Oct. 27.

Recall that in March 2017, the government committed to
the IMF to revise gas rates for households and heating utilities to “import
parity levels” as of October 2017. Instead, it has kept rates unchanged since
because the revision involves a large hike (of at least 20%) that is
politically damaging for the current government, particularly Prime Minister
Volodymyr Groysman.

Alexander Paraschiy: It is even
more apparent now that the Cabinet is willing to hike gas prices for households
only if it’s sure that it will get IMF confirmation of a new loan tranche the
next day. Last week, it became clear that the Oct. 18 deadline for such a
decision was hardly possible, so there may be a need to extend current gas rates till the end of October.
The good news from this story is that the government is still expecting
positive feedback from the IMF this month.

The last major obstacle in achieving an IMF loan
tranche will be parliament’s ability to approve the draft of the 2019 state
budget, which is expected today or tomorrow. In any case, it looks likely that
the IMF loan tranche will arrive in November, or at minimum, Ukraine will get
positive feedback on the next tranche. Even the mere promise of a loan tranche
will enable the government to secure international financing for this year’s
budget deficit from a planned international Eurobond placement.