Ukrainians will have to pay a 23.5 percent more for gas from Nov. 1, Ukrainian Prime Minister Volodymyr Groysman said during a government meeting on Oct. 19.
The decision had to be taken to fulfil one of the key demands of the International Monetary Fund, so that Ukraine can be given the next tranche of the IMF’s bailout loan, Groysman said.
Over the years of its independence, Ukraine has accumulated more than $50 billion in external debt. The time has now come to return that debt, Groysman said.
Ukraine faces major public debt repayments in 2019-2020 to cover its fiscal deficit, which is 2.5 percent of GDP, the World Bank said in a prognosis for Ukraine released on Oct. 4.
“The government needs $7.7 billion in 2019 to repay the public debt… Another $2.9 billion (is) needed to cover the fiscal deficit next year,” the World Bank said.
In order to find the money, the World Bank recommended that the Ukrainian government not to exceed pay increases of 12 percent, as planned in the 2019 budget, and to resume fulfilling its IMF program.
Cooperation with the IMF is key for Ukraine to qualify for further loans from the European Union and other international organizations.
“And we have no other option to prevent really hard consequences, in particular, default,” Groysman said. “Because if the IMF stops its cooperation with Ukraine, we won’t have any resources to service the debts of the previous governments.”
Ukraine hasn’t got any money from the IMF’s $17.5 billion bailout program it signed in 2014 for more than a year. The IMF has already allocated $8.7 billion, but the last $1 billion was transferred back in April 2017.
“Ukrainians still remember what default is from the 1990s: sky-high inflation, prices rise, no wages. We need to prevent that,” Groysman said.
Ukraine promised to raise gas prices to market levels to get loans from the IMF, but has failed to fulfill its obligation for more than two years.
Groysman said the Ukrainian government had been negotiating the gas price rise since July, and at first IMF demanded a 60-percent raise.
“I know it’s hard for every Ukrainian family. And we’ll help everyone who really needs our help with government subsidies,” Groysman said.
