Ukraine has agreed to end subsidised energy prices for homeowners in exchange for aid from the International Monetary Fund (IMF).
The IMF has been in talks with Ukraine’s government for nearly a month on rescuing its economy.
The energy sector reforms will take place alongside other banking measures to get an international loan of $27 billion (£16bn) over the next two years.
Nikolay Gueorguiev, IMF’s Mission Chief for Ukraine said in a statement yesterday: “A key step is the commitment to step by step energy reform to move retail gas and heating tariffs to full cost recovery, along with early action towards that goal.”
State-owned energy company Naftogaz owes Russia billions in unpaid gas bills.
Without action the IMF said the deficit could widen to more than 10% of the country’s GDP in 2014, up from nearly 2% in 2013.
William Murray, Deputy Spokesman for the IMF’s Communications Department added: “The authorities are moving to reduce subsidies to their energy sector. Prices in Ukraine are two to three times lower than most of the neighbouring countries in the region.”