April 3, 2019 / 10:39 AM / 7 months ago

Ukrainian government bans gas price hikes before vote

FILE PHOTO: Ukrainian Prime Minister Volodymyr Groysman speaks during a parliament session to review a proposal by President Petro Poroshenko to introduce martial law for 60 days after Russia seized Ukrainian naval ships off the coast of Russia-annexed Crimea, in Kiev, Ukraine November 26, 2018. REUTERS/Valentyn Ogirenko

KIEV (Reuters) - The Ukrainian government has banned state-run gas producer Naftogaz from raising consumer gas prices, Prime Minister Volodymyr Groysman said on Wednesday, a move likely to please voters but disturb the country’s creditors.

The ban, which took effect retroactively from April 1, was announced as President Petro Poroshenko, a Groysman ally, tries to boost his chances ahead of the second and final round of a presidential election on April 21.

Poroshenko narrowly qualified for the run-off by coming second in a first round vote last Sunday, but faces a tough task to beat frontrunner Volodmyr Zelenskiy, a TV comedian-turned-politician.

While capping consumer gas prices at their current level of 8.55 hryvnia ($0.32) per cubic meter, Groysman said on Wednesday that the government was at the same time authorizing Naftogaz to cut prices if favorable market conditions prevailed.

Groysman said last month he would urge the finance ministry and Naftogaz to start talks with the International Monetary Fund to try to prevent any future rise in gas tariffs for households.

The IMF, a major lender to Ukraine, has repeatedly urged Kiev to raise gas tariffs to market rates, making it a condition of future financial aid for the war-hit country.

The Ukrainian government raised gas prices by nearly a quarter in October, allowing it to secure a new $3.9 billion stand-by aid agreement with the IMF.

Gas prices are a sensitive issue in a country where a large part of the population lives on the verge of poverty, and the increase in October dented Poroshenko’s popularity with some voters.

Reporting by Andrei Makhovsky; Writing by Andrew Osborn; Editing by Christian Lowe

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