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. Last Updated: 07/27/2016

Hryvna Sparks Currency Dive


KIEV -- Ukrainians scrambled to change their old money into U.S. dollars Monday following the announcement that the government next week would introduce its long-awaited, permanent new currency, wiping five zeros off the present unit.

The interim karbovanets plunged against the dollar at private exchange booths for the first time in more than a year in this former Soviet republic, which has been showing increasing signs of economic stability recently.

The karbovanets was trading as low as 220,000 to the dollar at some exchange points in Kiev on Monday -- down from 176,000 last week.

The National Bank's official rate has been between 175,000 and 180,000 since the beginning of this year.

The dive was attributed to the high demand for dollars as Ukrainians began dumping their karbovantsy before the hryvna, the new currency, is introduced Sept. 2.

Dmytro Rikhberg, a spokesman for the National Bank, said the rush was unjustified.

People will have until Sept. 16 to trade their karbovantsy for hryvna and all exchange houses will be ordered to use an official National Bank rate, he said.

"There's no need for panic," he said.

One hryvna will initially be worth 59 cents, or 100,000 karbovantsy.

The most obvious effect will be to slim down price tags that became bewildering strings of zeroes in the hyperinflation that struck after Ukraine became independent of the Soviet Union exactly five years ago.

After the exchange, the hryvna would be stabilized at around 1.75 to 1.76 to the dollar, deputy prime minister Viktor Pynzenyk said during the announcement Sunday.

Banknotes denominated in hryvna, the currency used during the times of the Kievan Rus empire about 1,000 years ago, were printed in Canada and Britain and have been in banks' possession ready for circulation for about two years.

The new money will be made available at 20,000 exchange points across Ukraine, Yushchenko said, and added that the exchange period may be extended if necessary. Banknotes will be in denominations of one, two, five, 10, 20 and 50 and would also include coins.

"Today we're very happy that the hryvna has once again returned to Kiev and we wish it luck, that it keeps on the path of stability," Yushchenko said. Yushchenko said he expected a $1.5 billion hryvna stabilization fund from the International Monetary Fund to be agreed on next month.

IMF officials said that the special fund was still under discussion following the visit of a two-week mission to Kiev.

The karbovanets rapidly plunged in value after it was introduced in January 1992 and most people keep their savings in dollars or even Russian rubles.

The Ukrainian government has been promising to release the hryvna for three years, but has put it off because of economic instability.

In recent months, President Leonid Kuchma's tight economic policies have helped bring inflation down. It was 0.1 percent last month.

Until Monday the karbovanets had remained steady at about 176,000 to the dollar for the past three months.

The interim currency was trading at about 87,000 to the dollar when Kuchma introduced his economic reform program in October 1994, but fell to an all-time low of about 191,000 to the dollar in March. (AP, Reuters)