The economic crisis in Russia has echoed most strongly in Ukraine, and efforts to avoid a financial collapse may be giving way under a determined political assault by left-wing forces. With reserves down to under a billion dollars, equivalent to about three weeks’ imports, the central bank no longer has the ability to intervene in defense of the currency. Even though the central bank devalued the hryvnya on August 18 (the day after the Russian crash) and again on September 5, foreign-exchange markets have driven the hryvnya down another 30 percent in the past three weeks.
This deterioration occurred despite efforts by the IMF to buttress Ukraine’s finances following the Russian collapse. On September 4 the Fund announced approval of a US$2.2 billion, three-year credit for Ukraine and released $257 million immediately. The credit was intended to support continuation and deepening of the on-again, off-again reforms the government has pursued against parliamentary resistance for the past several years. But proposals by President Leonid Kuchma to cut the budget deficit, running by some measures at over 7 percent of GDP, have been no more successful since the Russian collapse than they were before. And efforts by Prime Minister Valery Pustovoytenko to improve the national balance sheet through coercion have become no more sensible. (Pustovoytenko, who in August locked 2,200 managers of tax-delinquent firms in a convention hall, last week locked up fifty directors of companies that had failed to repay foreign loans that carried government guarantees.)
The Socialists have called for a national referendum to vote “no confidence” in President Kuchma, and the Communists say they have the support of a majority of the parliament for the introduction of a resolution calling for the government’s resignation. In a meeting September 18-19 with Boris Yeltsin and Yevgeny Primakov, President Kuchma did secure relief from past debts to Russia for gas deliveries, and a promise that future deliveries could be paid in bartered goods, not cash. But while that may keep Ukrainians from freezing this winter, it won’t keep the opposition from trashing the government’s program.
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