Ukraine’s economic hardships may be a sign of things to come in Russia. With the exchange rate coming under pressure and reserves already dangerously low at $2 billion, the Central Bank raised interest rates in the hopes of finding buyers for financial paper denominated in hryvnas. Treasury bills moved from 25% in November to close to 50% in January.

Even so, confidence in the hryvna was not restored. In late January, the hryvna trading at 1.92 to the dollar, the Bank moved the top of the trading band from 1.95 to 2.25. The Bank says it intends to keep the hryvna in that band for the rest of 1998, but with inflation expected to reach 18% or more, the goal is difficult if not unattainable.

The high interest rates will stifle growth. Although the government and the