IMF is asking Serbia to raise electricity and gas prices three more times

Published on 23. December 2022., News

The International Monetary Fund is asking Serbia to raise electricity and gas prices, in addition to the announced price increase from January 1, 2023, three more times – on May 1 and November 1 next year, as well as on May 1, 2024. This stems from a document that was published by the IMF, and it refers to the recently approved two-year stand-by arrangement.

According to reports, the increase in the price of gas in each step should be “at least” 10 percent, and electricity – also according to the same dynamics in each step – by eight percent, minimum.

Through the newly approved stand-by arrangement, the International Monetary Fund allocated a total of 2.4 billion euros to Serbia. According to the announcement, Serbia will withdraw part of that money this year and next, while it will save the “follow-up” for 2024 if the need arises.

Placing Serbia’s energy sector on “sound financial foundations”

Energy policy, as portal N1 already wrote, is the focus of Serbia’s new arrangement with the International Monetary Fund.

The program envisages putting Serbia’s energy sector on a “sound financial foundation”. Energy companies, as pointed out, should become financially viable during the duration of the program.

“The next energy price increase will take effect after winter, followed by further adjustments.” “Investments in electricity production should be switched to renewable energy sources, with new business plans and possible participation of the private sector, while professional permanent management would be in charge of implementation,” the IMF pointed out.

According to the document published by the IMF, an increase in the price of gas and electricity is necessary in order to enable the financing of full production costs in the medium term. The IMF believes that a gradual increase in prices will enable easier adjustment to the new prices, given that, as pointed out, incomes in Serbia are still far below the European average.

The first step, the IMF points out, is to increase the average price of gas by 11 percent from January 1, 2023.

“After that, we will implement a series of increases in the average gas price by 10 percent each, which will take effect on May 1, 2023, November 1, 2023, and May 1, 2024,” the IMF document states.

Gradual increase in electricity prices

The stand-by arrangement, as it is pointed out, includes a clause on consultations, which would be held in the event that market gas prices exceed 250 euros per MWh, on average, during a two-week period. In that case, as it is pointed out, a discussion would be initiated in order to help, if necessary, in suppressing risks to the budget.

The IMF predicts a gradual increase in electricity prices, at the same pace during the duration of the two-year arrangement. The goal is also the same – covering the costs of electricity production.

The first step is the already announced increase in the price of electricity by eight percent for households from January 1, 2023, while, according to the IMF, the upper limit for a simultaneous increase in the price of electricity for the economy is also eight percent.

“After that, a series of increases in the average price of electricity will be applied by eight percent each from May 1, 2023, November 1, 2023, and May 1, 2024,” according to the IMF.

The plan for these price increases will be considered, as stated, during the first review of the stand-by arrangement, BiF writes.

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