Ukraine and the country's main donor, the International Monetary Fund (IMF), are discussing possible repackaging undrawn funds from the existing $17.5bn Extended Fund Facility (EFF) agreed in 2015 into a $5bn-$6bn Stand-By Arrangement (SBA), according to the Ekonomichna Pravda online outlet.

The new support programme will be drafted and cover a 12-15 months period rather than the five year long programme currently in place, according to the publication. 

The current IMF deal is due to expire next year in any case. The increase of the gas price for households will remain among crucial condition for its implementation, the outlet reported citing unnamed sources in Kyiv. The Ukrainian government needs to accede to a 23% hike in the gas price for households by October 23 as part of the current talks, the outlet revealed.

Among other preconditions is a set of anti-corruption measures, specifically, the IMF insists that the country's main anti-graft body the National Anti-Corruption Bureau of Ukraine (NABU) should be responsible for checking the electronic declarations system of Ukrainian officials, which was launched in 2016.

Another key IMF requirement is approval of the 2019 state budget with a affordable deficit. Elsewhere it has been reported that the IMF insists the budget deficit is capped at 2.5% of GDP.

According to Timothy Ash, a senior sovereign strategist at BlueBay Asset Management, there are talks on the market that the first tranche under the new programme will amount to $1.9bn.

"Does not seem like there will be any new money, just repackaging undrawn money from EFF. Assume reform conditionality will remain unchanged," Ash wrote in a note recently. "Seems unlikely we will see any additional disbursements of IMF money beyond this $1.9bn this side of elections in March."

"But will likely help Ukraine's Finance Ministry to come to market this autumn to raise some new money and do another liability management exercise," the expert added.

Ukraine has received $8.4bn from the IMF so far under the multinational lender's EFF.

Meanwhile, Ukraine’s Social Policy Minister Andriy Reva said on September 26 that the nation's government may decide to refrain from hiking prices for natural gas for households and heating utilities in October.

It's possible that a cabinet resolution setting below-market gas prices will be prolonged for October "if a new gas price is not agreed upon with international partners," the minister told journalists.

As of September, gas prices for households are about UAH7 per cubic meter including VAT, according to supply companies, which is half the price charged by Naftogaz for industrial consumers. Ukraine's cabinet committed to the IMF in March 2017 to set household prices close to import parity level, but has since postponed any hikes and kept prices flat.

Alexander Paraschiy at Kyiv-based brokerage Concorde Capital believes that Reva's statement indicates that the government is not fully certain it will get the next loan tranche after the IMF reportedly added the requirement of a balanced 2019 budget to be approved by parliament. According to separate reports the government wants to use the next tranche to supplement budgetary spending ahead of the election, whereas the IMF is insisting the money be added to the reserves to underpin the stability of the currency.

"The cabinet is getting cold feet on its alleged agreement to raise gas rates for households (during an intense election campaign), and will seemingly do so only with the confidence that it will receive the next loan tranche soon," Paraschiy wrote in a note on September 28. "If the government manages to approve the budget in late October or early November, the loan tranche would arrive in mid- to late November, at the earliest."

With such schedule, it seems that ministers have realized they can get away with avoiding an October price hike, though prices will inevitably have to rise during the election campaign nonetheless, Paraschiy added. "We expect the cabinet will issue a decree in the next few days that extends the current prices to October," he wrote in the note.