June 8, 2018 / 3:54 PM / in 14 days

Ukraine's sacked finance minister says no will in cabinet for gas price hike

KIEV (Reuters) - Oleksandr Danylyuk, sacked this week as Ukraine’s finance minister after a spat with the prime minister, said on Friday the cabinet lacked the will to raise gas prices even to secure more sorely-needed foreign aid.

Ukrainian former Finance Minister Oleksandr Danylyuk smiles during an interview with Reuters in Kiev, Ukraine June 8, 2018. REUTERS/Valentyn Ogirenko

Danylyuk told Reuters that Volodymyr Groysman’s government would have to try to reach a compromise with the International Monetary Fund because Ukraine faced “very serious consequences” if the IMF declined to disburse more aid.

Danylyuk’s comments suggest Ukraine’s hopes of clinching more IMF aid soon could be disappointed, even though parliament passed a law on Thursday to create a special court to try graft cases, a milestone set out in the IMF’s aid program.

The IMF has backed Kiev with a $17.5 billion cash-for-reforms deal since Russia’s annexation of Crimea plunged Ukraine into crisis. But Ukrainian foot-dragging on reforms and tackling entrenched corruption has stalled aid payments since last year.

Raising gas prices and creating an independent corruption court are red lines for the IMF.

“No,” said Danylyuk, when asked whether the cabinet had the will to raise gas prices before elections next year.

Ukrainian former Finance Minister Oleksandr Danylyuk speaks during an interview with Reuters in Kiev, Ukraine June 8, 2018. REUTERS/Valentyn Ogirenko

“But I did my best actually to try to bring together these two opposite positions,” he said, between Ukraine’s refusal to raise gas tariffs and the IMF’s insistence on a rise as a condition of more funding.

“So compromise needs to be found and that is where the government should work now. It will not be easy but there is no alternative.”

Groysman’s spokesman did not immediately reply to a request for comment.

Earlier on Friday, Groysman told parliament the issue of hiking gas prices was complicated and “very sensitive for Ukrainian citizens” and that the government had not yet found an answer.

Ukrainian former Finance Minister Oleksandr Danylyuk speaks during an interview with Reuters in Kiev, Ukraine June 8, 2018. REUTERS/Valentyn Ogirenko

Danylyuk said Groysman’s stance “makes finding a compromise more difficult”.

“CORRUPT THINKING”

Lawmakers passed legislation on Thursday designed to ring-fence court decisions from political pressure or bribery in the ex-Soviet republic, where entrenched corruption remains a deterrent to foreign investors.

Groysman said the law’s passage showed Ukraine’s fight against corruption was intensifying. But the IMF said it would first assess whether the law, which had undergone around 2,000 amendments, was sufficient.

“Look, if Ukraine doesn’t get (an) IMF tranche, we will have very serious consequences, political and financial consequences,” Danylyuk said.

Not getting more IMF money would result in high inflation and government spending cuts totaling $4 billion, he said, though he played down fears of Ukraine overshooting its budget deficit of 2.5 percent this year.

After Groysman asked parliament to sack him, Danylyuk said he had been asked to back “political corruption”, using state money to fund projects of favored lawmakers.

Asked to elaborate, Danylyuk said state money was given to lawmakers to buy their support in parliament, which was poor practice even if the legislation being voted on benefited the country.

“They fix the votes like this,” he said. “If it’s for good reason, maybe it’s even good, right? But it’s a bit odd, isn’t it? If it’s for bad reason, it’s actually twice as bad,” he said. “It is corrupt thinking.”

Additional reporting by Natalia Zinets; Editing by Catherine Evans and Gareth Jones

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