Daily Insight-IMF mission to arrive in Kiev end-Oct.; Kyivenergo/Zahidenergo privatisation; IUD/Alchevsk

According to Vice Premier and Minister of Social Policy, Serhiy Tyhypko, as reported by Interfax Ukraine yesterday, Ukraine expects the IMF mission to arrive in Kiev for the next cooperation programme review at the end of October.

After receiving SDR1.25 (US$1.9bn) in July 2010 and another SDR1bn (US$1.5bn) in December, in the framework of the current cooperation programme, worth SDR10bn (US$16bn) in total, Ukraine\'s cooperation with the Fund has been stalled due to the country\'s lack of progress on a number of reforms. To date, the only outstanding issue is the gas and heating tariffs for the households, which need to be raised, the IMF insists, so that the financial balances of Naftogaz, the state oil and gas monopoly, become sustainable. Despite repeated attempts to persuade the IMF to leave this politically sensitive issue intact, the Fund remained firm, insisting on the necessity to raise the tariffs, if Ukraine is to receive the next tranche, which could reach US$3bn.

At the same time, Mr Tyhypko mentioned that the government hopes to solve the problem of Naftogaz\'s financial sustainability another way, through reaching an agreement with Russia to lower the purchase price for imported gas, therefore lowering the input cost for Naftogaz, with the final gas prices for households left unchanged.