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Ukraine hopes to agree on new gas price with Russia, save $6 bln per year

November 15, 2011, 21:49 UTC+3
The $16 billion loan was approved on July 29, 2010, to support the economic reforms in Ukraine
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KIEV, November 15 (Itar-Tass) —— Ukraine will save $500 million each month when it agrees on an acceptable gas price with Russia, Ukrainian Prime Minister Nikolai Azarov told the national First Channel.

“As soon as we agree on an acceptable gas price, we will save $500 million each month and $6 billion per year,” he said, adding that it was a way to stabilize the national balance of payment.

Ukraine will not need a loan of the International Monetary Fund (IMF) when gas negotiations with Russia are over, Azarov said.

“We are working with the IMF, supporting our arguments with forecasts and proving that our forecasts are realistic,” he said. “The Russian gas price is the main problem impeding Ukraine-IMF negotiations.”

“This does not mean that we will immediately apply for a loan [when the negotiations are over]. There is no such need. We lived through this year without tranches and paid our debts regularly,” he said.

The IMF is ready to intensify negotiations with Ukraine on a stand-by program review after Ukraine attains final results at the gas negotiations with Moscow, IMF Resident Representative in Ukraine Max Alier said at the sixth annual conference of the Adam Smith Institute, “Ukrainian Banking Forum”.

The Fund representative presented a forecast of Ukraine’s macroeconomic indicators in 2012. He forecasted a general deterioration of the economic situation, for instance, the deficit of Ukraine’s balance of payment might reach 5.5% of GDP, the GDP growth might keep within 3.5-4%, and the inflation would be less than 10%.

The IMF mission announced on November 4 that it had taken a pause for making additional technical work. The mission visited Kiev from October 25 to November 3 to elaborate recommendations for the IMF Board of Directors on the completion of the review of the stand-by program and the granting of the next loan tranche to Ukraine.

The IMF is completing consultations with the Ukrainian authorities and non-governmental organizations on the allocation of the next tranche of the stand-by loan, the Ukrainian National Bank reported on November 4.

Deputy Prime Minister Sergei Tigipko and Finance Minister Fedor Yaroshenko visited Washington DC to discuss further cooperation with the IMF.

The Ukrainian government said many times that it hoped to receive two tranches, each of $1.5 billion, before the yearend. The government said that the money would be added to the Ukrainian National Bank reserves.

Ukraine needs the IMF loan in the first turn for maintaining the exchange rate of the hryvna. It has a deficit in the balance of trade and a rather high demand for hard currency for paying for Russian gas. The gold and foreign currency reserves of the Ukrainian National Bank reduced by more than $3 billion in the past month.

An IMF demand to Ukraine is the growth of gas and heating charges.

The $16 billion loan was approved on July 29, 2010, to support the economic reforms in Ukraine. The program takes 2.5 years, and the loan has an annual interest of 3.5%.

Ukraine received the first tranche of $1.89 billion immediately after the approval of the program. The IMF Board of Directors approved the allocation of the second tranche, $1.5 billion, on December 22, 2010, on a number of conditions, including the pension reform.

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