Inflation in Ukraine continued to decline during the first two months of 1997. The 2.2 percent inflation rate recorded in January was followed by an 0.9 percent rate in February, well below the 2.1 percent figure officially forecast for that month. These rates are consistent with the 25 percent rate forecast for 1997, which is itself below the 39.8 percent rate recorded in 1996 — not to mention 1993’s hyperinflationary 10,000 percent figure. The Ukrainian National Bank has amassed some $3 billion in foreign exchange reserves, and capital inflows that caused the hryvnya to appreciate in nominal terms at the end of February have helped push interest rates on treasury bills to around 30 percent.
These developments suggest that Ukraine’s 1996 successes in reducing inflation and stabilizing the hryvnya after its introduction in August are continuing into 1997. They also suggest that investors are increasingly interested in holding Ukrainian treasury bills, perhaps in anticipation of an agreement with the IMF expected later this month. However, wage arrears in Ukraine continue to grow, and GDP, which declined by some 10 percent in 1996, shows no indication of increasing. Macroeconomic stabilization in Ukraine has yet to be translated into economic recovery — a fate that Ukraine shares with neighboring Russia, Belarus, and Moldova. By contrast, all three South Caucasian economies, as well as Kazakstan, Uzbekistan, and Kyrgyzstan, posted economic growth in 1996.
Lukashenko Decrees Bear His Stamp.