Ukrainian reforms 2.0: More shocks from rising communal fees

The people in Ukraine should prepare for new price hikes next year. It was no secret that the prices of utility services will be growing in 2017 too. The government announced that the prices will be rising within several years to meet the IMF requirements. However, it was not known how much the prices will grow. When the government submitted the draft budget for the next year to the parliament, experts figured out the expenses of the ordinary citizens on gas and heating.

The Ministry for Economic Development set the average price of gas at 6.6 thousand hryvnias per 1,000 cubic meters, Minister Igor Nasalik said. With the dollar rate forecasted at 27.2 hryvnias, the gas price makes up $245.8. The Ukrainian government is set to increase significantly not only the imported gas price but the prices of the utility services too.

“For ordinary consumers the new exchange rate of hryvnia and the price of the imported gas mean a 43% increase in the natural gas price,” says Dmitry Marunich, the co-chair at the Fund for Energy Strategies. “This will amount to 9.682 hryvnias.”

Central heating price will increase by 25%, as its cost value depends on gas price. Besides, Marunich says, the prices will be growing every quarter. “This is regulated by a new memorandum signed by Ukraine and IMF,” he says.

Another unpleasant news for the ordinary citizens of Ukraine is that when receiving the last $1 billion tranche Kiev pledged to toughen the rules of providing subsidies. “Actually, the government seeks to reduce the subsidies, and the people should be prepared for a new shock therapy,” the expert says.

During the last two years, the gas price increased 8-fold and the average utility prices for a two-room flat total about 4,000 hryvnias (10,000 rubles). The average salary in Ukraine was 5,300 thousand hryvnias (13,200 rubles) in July 2016, according to state statistics. With new price hikes, Ukrainians will have to pay for utility services nearly as much as they earn. As for the subsidies that now save many families from poverty, they will no longer be accessible to everyone.

It is noteworthy that in neighboring Romania that is an EU member, there are fixed gas prices that have been brought in line with the market ones within several years already as required by the IMF. The average salary in Romania is $722, while the gas prices for the population is $357 per 1,000 cubic meters. Next year, the gas price in Ukraine will be as high. In the meantime, the average salary in Ukraine is lower than the one in Romania 3.6-fold.