Utility payments in Ukraine : Affordability, subsidies and arrears

The transition from a planned economy to a market economy has caused considerable hardship for the people of Eastern Europe. One important aspect of the social costs of transition is access to, and the affordability of, basic services like electricity, heat and water, which under communism had been supplied fairly cheaply and abundantly. This paper provides evidence on this issue from the Ukraine Longitudinal Monitoring Survey (ULMS). The paper identifies considerable differences in both access and affordability between different localities in Ukraine. Social protection measures can help to alleviate affordability constraints, but the analysis finds that social support is not well targeted. The currently low tariffs prevent an escalation of affordability problems but constraints nevertheless exist. Many households have accumulated substantial arrears as a consequence, although non-payment is a complex issue and not solely a function of affordability.