WHY HAS GAS PRICE INCREASED?
Information and Communication Department of the Secretariat of the CMU, posted 19 October 2018 17:09

Why has gas price risen?

This was a forced step aimed to ensure further Ukraine’s development.

Many of us remember the time when Ukraine has been going through rough 1990s. Rapid inflation, delays in wages, high unemployment, then the first sharp devaluation of currency- the exchange rate increased from 3 to 5 hryvnia per dollar.

In 2018  Ukraine could  go back to the 1990s again. In 2006-2013, billion dollar loans were taken, but the former governments have not directed these funds to the country’s development, instead they have literally thrown money out of window. During this time, Ukraine's debt  raised by more than $50 billion. This is the country’s annual budget.

Now Ukrainians are hostages of circumstances due to the irresponsible actions of previous governments. Now it's time to return these debts - Ukraine has to pay off a sum worth $ 30 billion dollars in the next five years.

The incumbent Government has already embarked on reducing the debt burden - for the first time in recent years, the percentage of debt to GDP in dollar terms has decreased. And the recently adopted strategy envisages concrete steps towards achieving  financial independence.

However, today we have to enter external markets in order  to make relending  to serve our debts. To this end, cooperation with the International Monetary Fund (IMF) is of critical importance. The country could be on the verge of bankruptcy without the IMF loan. Ukraine could plunge into a dollar chaos with a rapid growth in goods and services. The Government would be forced to reduce social programs and freeze wages and pensions. The threat of going back to the 1990s would be real!

We had arduous negotiations with the IMF. There was a requirement of the partners to equalize the price of industrial gas and gas for households. Under such conditions, the payment of ordinary citizen for heating should be increased by 60%. The government has disagreed with this condition by bringing forward they key argument: incomes of citizens do not allow to pay the market price for gas.

The outcome of the annual negotiations was a compromise which became possible due to the persistence of the Ukrainian Government. Starting from November 1, the gas price will increase by only 23% instead of 60%- almost three times less than it could be. The corresponding decision was endorsed by the Cabinet of Ministers on October 19, 2018.

This is a compulsory step for the further country’s development, but the state will protect those who need assistance – financially disadvantaged citizens will receive a housing and utilities subsidy. And from January 2019, monetization of subsidies will start in Ukraine. Ukrainians will receive  monetary compensation for the part of saved resources.

The Government  will allocate additional UAH 100 million to the "warm loans" program This will enable citizens to receive irretrievable assistance from the Government for energy modernization of housing: boiler replacement, insulation, installation of meters.

Today we have to pay the price for the flippant attitude of the former politicians. It's time to make high impact decisions that will allow Ukraine to develop and eventually to become a strong and successful country, as it deserves to be.