In 2027, Ukraine may begin the process of gradually raising electricity and gas rates for households after developing appropriate protection programs.
This is stated in the updated memorandum on Ukraine’s economic and financial policies under the Extended Fund Facility (EFF) program with the International Monetary Fund (IMF), following the results of its first review.
“The government has committed to conducting an assessment by the end of February 2027 of utility support programs aimed at protecting vulnerable households. Once appropriate protection programs have been developed, household tariffs should be gradually increased—this process can begin in 2027,” the document’s authors state.
According to the text of the memorandum, the goal of this process is to meet the needs for recovery and debt reduction in the energy sector, while full price liberalization will eventually be necessary to attract post-war investment.
“The Ukrainian government (IF-U) emphasized that tariff increases should occur only after an assessment and, if necessary, reform of existing social protection systems,” the authors of the document noted, among other things.
It is noted that large-scale quasi-fiscal measures in the energy sector and the existing tariff structure pose serious risks to investment, reconstruction, and the development of a stable energy supply and power grid.
According to preliminary expert estimates—which will be refined during future technical assistance—fixed energy tariffs that are below market rates—in particular, due to moratoriums imposed since the start of the war—cost at least 2.2% of GDP annually in the form of off-target subsidies resulting from the quasi-fiscal activities of state-owned energy enterprises, while targeted transfers for public utilities account for about 0.6% of GDP in the budget.
“Significant fiscal risks arise from fixed utility rates for households, which currently amount to about 55% of comparable supply contracts,” the document states.
As a result, the energy sector is increasingly relying on in-kind contributions, grants, and preferential financing to meet its needs for repairs and imports. For example, Naftogaz took on additional debt to finance repairs and imports, causing its debt to rise by 63% year-over-year in 2025. The government is currently seeking donor support to ensure the timely completion of necessary repair work and the implementation of plans to strengthen resilience, the authors of the document noted.
ENERGY, HOUSEHOLD, IMF, subsidy, TARIFF
Related:
