IMF believes current utility tariffs need to be revised: Ukraine prepares a plan for changes
Ukraine, with technical support from the International Monetary Fund, is preparing a roadmap for the gradual liberalization of the energy market. After the introduction of social protection mechanisms for vulnerable households, tariffs for the population should be gradually adjusted.
Thus, the IMF and Ukrainian authorities have reached a Staff-Level Agreement on the first review of the four-year Extended Fund Facility (EFF) program worth $8.1 billion. After approval by the IMF Executive Board, Ukraine will be able to receive about $690 million, and the total disbursements under the program will increase to $2.2 billion.
IMF: the current tariff system weakens state energy companies
One of the key signals in the statement was the assessment of the situation in the energy sector.
The IMF noted that the focus is now shifting to reforms necessary to prepare for the liberalization of the energy market. According to the Fund, the current system of utility tariffs for the population and related special obligations in the energy market have worsened the financial condition of state energy companies.
The Fund believes this limits the resources needed for critically important investments, repairs, and restoration of energy infrastructure.
Ukraine is preparing a roadmap for tariff changes
To address this problem, the Ukrainian authorities, with technical support from the IMF, are preparing a special roadmap for the gradual liberalization of the energy market.
The document should include social protection mechanisms for vulnerable categories of the population.
After preparing such mechanisms and based on the approved roadmap, tariffs for household consumers, as noted by the IMF, should be gradually adjusted to solve the financial problems of the energy sector and create conditions for attracting investments.
The Fund also emphasized the need to strengthen the independence and integrity of the National Commission that regulates energy and utility services.
What other requirements does the IMF program include
In addition to energy reforms, the IMF highlighted the need to increase domestic budget revenues and reduce the shadow economy.
Among the agreed measures are the cancellation of exemptions from VAT and customs duties for international postal shipments, combating abuses in transfer pricing, as well as reforming the simplified taxation system.
The Fund also stressed the importance of reforming the Economic Security Bureau and the State Customs Service to counter tax evasion.
Ukraine will receive a new tranche
The IMF reported that all quantitative performance criteria of the program were met by the end of March. At the same time, the implementation of some structural reforms is delayed, so the parties agreed on an updated schedule for fulfilling obligations.
After the Executive Board approves the review results, Ukraine will be able to receive the next tranche of about $690 million.
The Fund forecasts that Ukraine's economic growth in 2026 will slow to 1–1.6% due to the consequences of Russia's war against Ukraine and external risks that remain extremely high.
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