Ukraine Signals Gas Price Rise To Unlock IMF Aid

KIEV, Ukraine -- Ukraine signaled it could raise gas prices for some households, a long-delayed move that could help it unlock critical financial help from the International Monetary Fund.

Prime Minister Mykola Azarov said Friday that the government could raise prices for wealthier citizens, but wouldn't cave to all IMF demands as it wasn't "desperate" for loans and was seeking funding on international markets.

The comments to a small group of Western reporters come days before IMF officials arrive in Kiev on Jan. 29 for two weeks of talks, where the government says it hopes to secure a $15.4 billion lending program.

Ukraine is battling an economic slowdown as demand for its steel and chemicals exports dwindle.

The government is to repay over $9 billion in foreign debt this year, more than half of it to the IMF.

Mr. Azarov's comments are the first indication that the government may give ground on gas price rises, which it had previously ruled out.

The Fund has long argued that the government should cut hefty gas-price subsidies in order to reduce the burden on the national budget and promote more efficient energy use.

For months, Ukraine has tried in vain to secure a lower price for critical gas supplies from Russia, which has demanded closer economic and political ties in return.

President Viktor Yanukovych's planned trip to Moscow at the end of December for a key meeting with Russian counterpart Vladimir Putin was canceled at the last minute.

Analysts and Western officials said Ukraine is now turning to the West for support.

One Western diplomat in Kiev said the government now appeared to be "serious" about securing the IMF funding.

Mr. Azarov said Ukraine is ready to review the budget deficit and key monetary indicators to find common ground with the IMF mission.

A previous loan program was frozen in 2011 after Ukraine refused to raise gas prices.

Mr. Azarov said his government is also negotiating to borrow on international markets, but gave no further details.

"Currently, the financial market is extremely favorable for borrowing," Mr. Azarov said.

"And we have a normal fiscal situation; we have something to go to investors with."

First Deputy Prime Minister Serhiy Arbuzov is currently in New York "negotiating with investors," he said.

"I think Moscow is playing much harder to get, and hence Ukraine is seeing if it can get softer terms from the IMF. That said, if the government can tap the market then perhaps its willingness even to cut a deal with the IMF might be limited," said Timothy Ash, an analyst at Standard Bank.

Source: The Wall Street Journal