Ukrainians Rush to Get Back Savings

ReutersPeople standing in line Friday at an Oshchadbank office in Kiev to claim money lost in the Soviet collapse in 1991.
KIEV -- Thousands of Ukrainians streamed to state bank offices Friday to get compensation for savings lost in the 1991 Soviet breakup -- a promise of new Prime Minister Yulia Tymoshenko that some analysts caution could hurt the economy.

The payments by the state Oshchadbank, however, were slow to come. People across the country stood in long and impatient lines.

An administrator at a Kiev branch of the bank suffered a head injury when an angry crowd pushed her to the floor. A retiree in the central Zaporizhia region died of a heart attack as he waited in line to receive the money.

Tymoshenko pledged to pay out 6 billion hryvna ($1.2 billion) of the estimated 130 billion hryvna ($26 billion) debt to citizens this year. The remainder will be paid out over the next several years, the government said. The exact amount of the debt will be calculated once citizens claim the money.

Ukraine follows in the footsteps of Lithuania and Kazakhstan, which returned some -- or almost all -- of Soviet-era savings to their citizens. Other former Soviet nations including Russia have yet to follow suit.

Tymoshenko made compensating for the lost savings a theme of her campaign for parliamentary elections last year, which swept her to the post of prime minister. Ukrainians will get up to 1,000 hryvna ($200) in cash for their Soviet-era savings. One Soviet ruble will be equivalent to 1.05 hryvna. Those who held over 1,000 hryvna in their accounts will be able to receive the rest of their money later in noncash payments, such as vouchers that would offset utility bills.

Some experts applauded the decision, saying it would restore people's trust in the government and benefit the needy, especially pensioners and low-paid government workers.

But Anton Struchenevsky, an economic analyst at Troika Dialog, dismissed the measure as a populist move that would strain the state budget.

"Such methods can destabilize the economy and lead to hyperinflation," he said.

The 2008 budget forecasts annual inflation of 9.6 percent, but experts say it could spike to more than 15 percent.

Sophia Panchenko, an 80-year-old retired school teacher who counted her 1,000 hryvna at a bank office in central Kiev, said she was glad to receive at least a fraction of the money the state owed her. "In our old age, they are giving crumbs -- but at least we get something."