The World Bank has joined the IMF in deploring Ukraine’s current economic performance. Recently the IMF put a multi-billion euro loan on hold, last week Moody’s downgraded the country’s debt; now the World Bank says growth in 2013 will be close to zero, and aid is not working.
“This financial support has been very much constrained by very low residential gas and district heating tariffs, because when you can’t recover your costs, it does not make make sense for anybody to invest, to improve that sector,” says the bank’s Belarus, Moldova and Ukraine Director Qimiao Fan.
International lenders want Ukrainians to pay closer to the market price for energy. Consumers complain on their wages that means they will freeze. However low tariffs dissuade foreign investors, even though Ukraine’s creaky gas and oil infrastructure is crying out for cash to modernise. But cold electors can vote, and Yanukovic has a potentially tricky re-election in 2015.
“Reforms in the energy sector can’t be fast-tracked and you can’t raise residential tariffs when the population can’t pay them,” says an MP in his Party of Regions, Vitaly Khomutynnik.
Investors want to enter the Ukrainian market, but are put off by the prospect of waiting many years before seeing a return on investments, if at all.
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