Ukraine Government Drops Steel Subsidies After IMF Pressure

KIEV, Ukraine -- Ukraine government, pressed by the International Monetary Fund, scrapped massive state subsidies to its steel sector, which were introduced by former Prime Minister Yulia Tymoshenko, a government official said Friday.

Since their introduction in November 2008, Ukraine's steel sector has received Hryvnia 1.5 billion ($190 million) in subsidies, mainly from lower tariffs in railroad transportation and power.

Ukraine's steel sector accounts for up to 40% of the country's exports, and is the key source of hard currency.

The sector was forced to shut down many steel producing assets in late 2008, when external demand for steel plunged during the global economic downturn and ensuing slowdown in construction.

Ukraine's government introduced the subsidies by ordering state-owned companies to reduce their tariffs to steel companies.

These cross-industry subsidies were criticized by the IMF, which demanded an end to the practice if Ukraine was to qualify for a $14.9 billion 30-month loan.

The funds, which were approved earlier this month, are designed to help Ukraine fill its budget gap and boost investor confidence.

Source: Platts