Ukraine to Cut Gas Prices in Move That May Strain IMF Relations

(Bloomberg) -- Ukraine will cut natural gas prices next month, a move that may strain cooperation with the International Monetary Fund.

State-run energy company NAK Naftogaz Ukrainy will reduce the cost of the fuel for households by 3.4 percent from May 1, Prime Minister Volodymyr Hroisman said on Wednesday. Hours earlier, President-Elect Volodymyr Zelenskiy urged the government and Naftogaz to hold consultations with the IMF about the cut.

Ukraine to Cut Gas Prices in Move That May Strain IMF Relations

“I said at the last government meeting that if Naftogaz didn’t cut the price, I would suggest dismissing the CEO,” Hroisman said. “They heard me and they will cut the price. And I think it is not the last cut as markets point to a further decrease.”

It’s unclear whether the cut violates the country’s $3.9 billion financing deal with the Washington-based lender. Zelenskiy signaled before the election his commitment to working with the IMF, though he generally shied away from specific policy proposals during the campaign. The actor and comedian won Sunday’s runoff election against incumbent Petro Poroshenko in a landslide.

Ukraine sealed a new program with the IMF in December and received the first tranche of $1.4 billion after it raised gas prices by 23 percent. The government was supposed to raise the price by another 15 percent from May to qualify for the second disbursement. Ihor Shpak, a spokesman for the IMF’s Ukrainian office, declined to comment immediately.

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