IMF: energy subsidies cost Ukraine 3.7% of GDP a year; ministry says the tariff moratorium stays

The International Monetary Fund has published the technical report “Assessment of Energy Subsidy Fiscal Cost and Reform Options”, dated October, on the cost of the public service obligations (PSO) through which Ukraine keeps household electricity and gas prices below market levels. The details were reported on 3 November by Interfax-Ukraine, and on the same day the Ministry of Energy responded with a statement.

The figures. According to the IMF, the fiscal costs of energy subsidies linked to the PSO and similar measures reached 3.7% of GDP a year in 2024–2026. Household tariffs cover 41% of costs for electricity and 49% for gas. The electricity PSO accounts for about 1.8% of GDP and the gas PSO for about 1.4%, while a further 0.3% of GDP goes to heating subsidies and 0.2% to support for renewable energy producers. The Fund notes that Naftogaz and Energoatom cover most of these costs from their own balance sheets.

The two scenarios. The IMF proposes phasing out the PSO over three years: 20% in the first year, 60% in the second and 20% in the third. In scenario A, the electricity tariff would reach 9.7 hryvnias/kWh in the third year and the gas tariff 22 hryvnias/m³, including VAT, i.e. increases of 141% and 104%. In scenario B, a post-war recovery scenario, the target would be 6 hryvnias/kWh and 17.2 hryvnias/m³, increases of 52% and 60%. The fiscal savings would be 3.2% and 1.5% of GDP respectively. The Fund calls for any increase to be accompanied by targeted social support.

The ministry’s response. “The moratorium on tariff increases in Ukraine continues to apply,” the Ministry of Energy said, adding that, under the law, the tariff system can be changed only after martial law ends. The scenarios are “calculations, not commitments”, and the report is based on the 2021 structure of household consumption, the ministry says: first an effective support model for families, then price changes.

What comes next. The ministry is working on a long-term roadmap for reform of the sector and on a “single bill” online platform integrated with state registers through the Diia app. The household electricity tariff has stayed at 4.32 hryvnias/kWh since June 2024, and at the end of September the government extended the PSO on the gas market until 31 March 2027, according to the Ukrainian business press.

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