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Ukrainians will pay 50% more for gas come 1 May

by , 26 March 2014

In an effort to secure a new aid package from the International Monetary Fund, domestic consumers in Ukraine will pay 50% more for gas come the start of May. The Ukrainian state energy company, Naftogaz made the announcement yesterday. Let's take a closer look at why the government is putting through such a high increase…

The price of gas must rise to meet demands by the IMF

Ukraine is desperate to secure an aid package from the International Monetary Fund (IMF), says BDLive. As part of the IMF’s demands for Ukraine to get the aid, it must raise “the price of gas for domestic consumers by more than 50% from May”.

And the Ukrainian government can’t stop there, adds BDLive. There will be a series of hikes in the price of gas until 2018.

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In Ukraine, up until now, consumers buy “gas at heavily subsidised rates,” reports the BBC. But this subsidy must stop as part of the deal proposed by the IMF.

Ukraine currently sells gas at a loss to consumers

As it stands, Ukraine “buys more than half of its natural gas from Russia’s Gazprom,” adds the BBC. It then sells this onto consumers “at below market price”.

The new interim government under Arseny Yatseniuk is trying to “secure $15 to $20 billion in a new aid package” from the IMF, says Fin24.

The aid is to “help Ukraine’s interim government plug its budget deficit and meet foreign loan repayments,” notes the BBC.

Naftogaz is the largest state company in Ukraine, says BDLive. It “constantly runs at deficit”. Even when the hikes comes into effect, the company will “still be running a deficit of 80 billion hryvnia ($8 billion) this year”.

The move isn’t going down well with Ukrainians who in just over a month will see massive rises in their energy costs. But the decision is necessary to secure aid.



Ukrainians will pay 50% more for gas come 1 May
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