Publication: Monitor Volume: 4 Issue: 229

Ukrainian President Leonid Kuchma has stated that the country’s national currency, the hryvnya, should be floated, and all restrictions on hard currency purchases canceled so that the currency market might “function normally.” He advocated canceling the “currency corridor,” or the fixed hryvnya exchange rate band (Inter TV, ICTV, December 9). This and temporary restrictions on currency purchases have been regarded as the measures effectively preventing the hryvnya from a further devaluation from the 40 percent loss it has already suffered, a loss many Ukrainian liberal economists believe is due in part to circumstances within Ukraine and in part to the financial crisis in Russia. The president has apparently ceded to the pressure from the powerful industrial lobby, led by Anatoly Kinakh, the president of the Ukrainian Union of Industrialists and Entrepreneurs. Kuchma headed this organization prior to his election as president in 1994. A floating rate may cause devaluation of the hryvnya, stimulating Ukrainian exports in the short-term, but undermining trust in the national currency. Kinakh is supported by several influential economic advisers in Kuchma’s administration.

Kuchma’s statement is a sign of declining influence of Viktor Yushchenko, the confirmed monetarist and National Bank head, on state economic policies. Yushchenko has to date opposed introduction of a floating rate for the hryvnya and liberalization of currency sales until the market shows clear signs of improvement. –OV