The central scenario of the IMF staff under the Program Monitoring with Board Involvement (PMB) assumes that gas purchases of 5 billion cubic meters (bcm) will be needed in 2023, evenly spread over 12 months.
According to the schedule presented in the documents, without imports, Ukraine will end this heating season with reserves of 6 billion cubic meters and by the next heating season will be able to increase them only to 8.5 billion cubic meters, which will lead to their fall to 6 billion cubic meters by the beginning of 2024.
At the same time, taking into account imports, gas reserves at the end of this heating season will be only slightly below 9 billion cubic meters, and by the next will grow to almost 14 billion cubic meters, which is only about 0.5 billion cubic meters less than at the beginning of this season.
“To help address Naftogaz’s associated increase in financing needs, the government is already providing budget support to the company through an implicit subsidy in the form of foregone gas royalty revenues, estimated around UAH 145 billion ($3.5 billion) for 2023,” the IMF said in the materials on its website to the PMB.
More support will likely be needed, including as compensation for public service obligations, as retail gas prices are fixed at a level of UAH 7.4 per cubic meter, significantly below import parity prices.
At the same time, District Heating Companies (DHCs) and the Gas Transmission System Operator (GTSO), whose liquidity position is suffering from a drop in transit fees and low-capacity use, may also require support.
“Overall, staff estimate that up to UAH 150 billion ($3.6 billion) in additional financial support to Naftogaz, the GTSO, and DHCs could be required in 2023,” IMF experts said.