RT.com, April 27, 2016
To meet demands put forward by the International Monetary Fund (IMF), Kiev has doubled the cost Ukrainian consumers pay for gas. A single price has been introduced by the country’s newly-appointed Prime Minister Vladimir Groysman on Wednesday. The PM called the measure unavoidable, adding that it could help reduce gas prices for consumers.
“This is consistent with the Ukrainian obligations to the International Monetary Fund,” he said at a Cabinet meeting.
The new flat rate tariff of 6,879 hryvnia ($272) per 1,000 cubic meters will come into effect next month, and it is nearly twice the price consumers paid during the winter.
Under the old system of pricing Ukrainians paid 3,600 hryvnia ($142) per 1,000 cubic meters for up to 1,200 cubic meters of gas. The cost rose to 7,188 hryvnia ($284) for consumption above that level.
Most Ukrainian households used slightly more than 1,200 cubic meters in the winter period, according to Naftogaz.
According to Groysman, the old system was open to manipulation through the sale to industrial users of higher-priced gas that was meant to be sold to households at lower prices. The new scheme will help to reduce corruption in the sector, said the PM.
Increasing energy tariffs for households and utilities, which were previously subsidized by the state, was one of the basic conditions of the International Monetary Fund to unlock $1.7 billion in new loans.
To get more loans from the IMF, Ukraine has to increase tariffs on housing utilities to an economically justifiable level. The tariff on electricity will be doubled by 2017 in spite of previous hikes along with gas and heating prices.
Electricity price in Ukraine to rise
The next stage of increase in electricity prices is scheduled for September 1, 2016
The National Energy and Utilities Regulatory Commission of Ukraine will increase the minimum electricity price for households by 25% from March 1, 2016, to UAH 0.57 per kWh, .
A two-year schedule of electricity tariffs increase for households was approved by the Commission in February 2015. According to the document, the minimum amount of “cheap” electricity is set at 100 kWh. The total amount of electricity above 100 kWh will be charged at a price of UAH 0.99 per kWh. When the monthly electricity consumption is above 600 kWh, the price will amount to UAH 1.56 per kWh for the volume exceeding the specified level.
By March 2017, electricity consumers will be divided into two groups, with the volume of consumption up to 100 kWh per month and the volume exceeding 100 kWh per month. For the first group of consumers the price of electricity will amount to UAH 0.90 per kWh, and for the second group the price will be UAH 1.68 per kWh.
It should be recalled that the state budget for 2016 was adopted on the basis of the average annual hryvnia exchange rate UAH 24.1 / $1.
Ukraine’s Ministry of Finance estimates the average hryvnia exchange rate to be UAH 24.4 per the dollar by the end of 2016. On February 29 the National Bank of Ukraine set the hryvnia exchange rate at UAH 27.05 per the dollar.
TECHNICAL ASSISTANCE REPORT — REDUCING SOCIAL SECURITY CONTRIBUTIONS AND IMPROVING THE CORPORATE AND SMALL BUSINESS TAX SYSTEM, by the International Monetary Fund, January 2016, 85 pages