Urgent need for reform in the Ukrainian energy sector remains
DIW weekly report 06 / 2019, pp. 88-95
Ukraine has been experiencing an economic decline for ten years, cushioned by international financial assistance. Ukraine has been experiencing an economic decline for the last ten years, which has been alleviated by international financial aid. For 20 years Western donors have been pushing for market-economy reforms in the energy sector, which Ukraine has repeatedly delayed or only half-heartedly implemented. The country is still the most energy-intensive economy in Europe.
Since 2014, the introduction of market prices for energy for commercial customers and tariff increases for private households have changed little. State-fixed energy tariffs continue to hamper competition in the energy market.
Government regulations ensure high profits and allow different prices for different end-users to be exploited, which encourages the black economy and corruption. At the same time, incentives for investment in energy efficiency and innovation are lacking.
International financial assistance should not cushion the consequences of misguided economic policy, but should be consistently linked to the implementation of concrete reform steps. This applies in particular to the introduction of market prices for all consumers and the creation of competition in the energy sector.