Kiev needs quick decisions on natural gas

Jan. 17, 2012 at 7:20 AM

LONDON, Jan. 17 (UPI) -- Ukraine needs to either lower natural gas prices or find a way to make a deal with the International Monetary Fund on a bailout, a market strategist said.

The IMF granted Ukraine a second loan in 2010 but froze payments in March when Ukrainian officials wouldn't raise tariffs for household gas as a way to trim a budget deficit. In December, the government said it could get relief if Russian energy company Gazprom lowered the prices it charges for Ukraine.

Barbara Nestor, a market strategist at Commerzbank in London, told Bloomberg News that Ukraine needs to take action as its economy slows.

"To get through the year, the government must agree on a lower gas price, sell assets or do a deal with the IMF," she was quoted as saying.

Last week, the Ukrainian government said it needs to get a better deal from Russia or meet IMF demands for a 30 percent hike in domestic tariffs.

If it can't get an IMF deal, "the government will have to continue depleting its limited foreign-currency reserves to meet its external debt obligations," said Liza Ermolenko, an emerging-markets economist at Capital Economics Ltd. in London.

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