KIEV: Ukraine on Friday decided to raise gas prices for domestic customers by almost a quarter in accordance with an International Monetary Fund demand in a move to secure fresh loans to avoid possible default.

The IMF in 2015 approved a $17.5-billion rescue package for Ukraine, in a bid to help it recover from two years of severe recession.

In return for more help, the IMF insisted Ukraine raise gas prices for consumers to market levels, and an agreement was reached in 2016 but Kiev was reluctant to implement it.

"From November 1, gas prices will rise by 23.5 percent," Ukraine's Prime Minister Volodymyr Groysman told his cabinet during an emergency meeting.

He added that "by incredible efforts" the Ukrainian negotiators managed to reach a compromise with the IMF and reduce the lender's initial demand to raise prices by 60 percent.

"If we are not able to continue cooperation with our international partners ... this could lead to the country being put into default," he said.

Ukraine has not received any money from the IMF since April 2017, when the fund released $1 billion for the cash-strapped country to repay loans.

A gas price hike is a sensitive issue for the cash-strapped country as its pro-Western leadership faces presidential and parliamentary elections in 2019.

The post-Soviet country's economy also suffered after the conflict with Moscow-backed rebels broke out in April 2014 and has already claimed more than 10,000 lives.