Ukraine: little room for maneuver with IMF over gas price hike - analysts
KYIV. Feb 25 (Interfax) - Ukraine will find it difficult to avoid raising gas prices for households if it wants to agree new financing from the IMF, financial experts surveyed by Interfax said.
The government and the National Bank of Ukraine are comfortable at the moment because the market for external borrowing to refinance its debt is open to them, the head of analytics at SP Advisors Vitaly Vavrishchuk said.
"Apparently, the authorities feel that Ukraine will not have serious difficulties in the coming months without renewing the program of cooperation with the IMF. Accordingly, there is no compelling need for a quick and cardinal reform of prices in the housing sector," he said.
Ukraine has no chance of securing a new IMF loan if it doesn't raise domestic gas prices, he said.
However, Art Kapital chief analyst Igor Putilin disagreed, noting that Ukraine's domestic gas production is sufficient to cover household needs.
"In principle Ukraine doesn't need to raise prices for households, since domestic production is sufficient to cover the entire volume of gas consumed by households and by budget-financed organizations," Putilin said.
"The gas used by plants that provide home heating would remain without an agreement. But the shortfall from Naftogaz Ukrainy could be eliminated by reducing the price of gas imports, which it can try to agree with Russia," he said.
But another analyst, Ivex Capital's Dmitry Churin, said the confrontation between Naftogaz Ukrainy and Gazprom is once more at a peak, as evidenced by the Russian gas giant's demand for $7 billion under the take-or-pay provisions of their contract.
"It all indicates that in practice negotiating a reduction in the price of Russian gas is unrealistic," Churin said.
Ukrainian President Viktor Yanukovych said last week Ukraine has no plans to raise gas prices for households and industry.
First Deputy Prime Minister Sergei Arbuzov said in mid-January that Ukraine planned to negotiate a new financing program with the IMF totaling 10 billion SDR (special drawing rights).
The latest stand-by program ended in December 2012. Financing under the program began in July 2010, but Ukraine was only able to secure disbursal of two tranches totaling 2.25 billion SDR. The program was frozen in the spring of 2011 during the second review: Ukraine spent 18 months in an unsuccessful attempt to have the IMF drop the demand for a gas price hike pending the completion of gas talks with Russia.
An IMF mission was in Kyiv on January 29-February 12 to discuss possible preparations for a new stand-by program. The mission will return to Ukraine in March to continue the talks.