Confusion, Hope Mark Hryvna’s Debut

The first day of currency reform brought long lines to Kiev’s currency exchange booths and new price tags to store shelves as Ukrainian consumers began using hryvnas. 

Although the change from the karbovanets, or kupon, to the hryvna, has been in the works for the last three years, the government appeared not to have released enough hryvna notes to meet consumer demand. 

“It’s a completely incomprehensible. I can’t change dollars or coupons. No one knows anything,” complained Serhy Shamarin, an unemployed Kiev resident. 

But after a few hours, exchange points that had stayed closed for much of the morning began to open and queues diminished. 

Deputy Prime Minister Viktor Pynzenyk said Monday September 2 that additional bank notes are on their way. 

“There are plenty of hryvnas,” he said. “There will be enough for everyone. Stores, banks, and savings branches will receive additional supplies over time.”

Retail sales in Kiev ground to a virtual standstill on the first day of the two-week currency transition period. Kiosk operators said they did not have a sufficient supply of hryvnas. They also complained about the cost of changing all their prices, with new price tags selling for up to 120,000 kupons (80 cents) each. 

Employees at the city’s main grocery store said 90 percent of their customers were paying with kupons.

The hryvna is expected to gain acceptance as it is used to pay salaries and pensions. Some enterprises said as early as the end of August that they would no longer accept payment in kupons, a stand described by the National Bank of Ukraine as “a normal phenomenon.”

The currency replacement will remove the strings of zeros on Ukrainian prices. The karbovanets has plunged in value in its first two years, and traded at 176,100 to the dollar last week. 

Ukrainian officials hailed the debut as a sign that the country’s post-Soviet economic woes are coming to an end. They also noted that the hryvna’s exchange rate has stabilized at 1.7 hryvnas to the dollar, higher than the 1.75 to 1 ratio forecast last month. 

But economics expert Oleh Soskin, head of the Institute for Societal Transformation in Kiev, warned that the hryvna could weaken once the government pays off wage arrears and clears up the tangle of debts between enterprises. His concern was echoed by Parliament Speaker Oleksandr Moroz in a television appearance this week.

To bolster its new currency, the government has imposed a price freeze that is to run until October 1. Pynzenyk has predicted that prices of manufactured goods would actually drop after the hryvna’s introduction. Such optimism, however, is not shared by some members of Parliament. Olekasandr Ryabchenko, deputy chairman of the Parliament’s Finance and Banking Committee, predicted higher prices as the result of the hryvna’s arrival.

Ukraine is hoping for a $1.5 billion stabilization fund for the hryvna from the International Monetary Fund. It also may peg the hryvna to a foreign currency. 

The hryvna was the currency used during the Kievan Rus empire 1,000 years ago and during Ukraine’s brief period of independence in 1917-18.

(Material from the Associated Press was used in this story.)

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