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Ukraine: A Nation Dips Into History's Pockets For Currency's Name

By Irena Chalupa and Natalia Tchourikova

Kyiv, 3 September 1996 (RFE/RL) -- A colorful, many-sized new currency called the hryvna began circulating in Ukraine yesterday to a mixed reception of delight and anxiety.

The hryvna -- and its subordinate unit, the kopijk -- replaces a temporary scrip, the karbovanets. The karbovanets has been in use since 1991 after the Soviet Union's breakup. The karbovanets -- simply the Ukrainian word for "ruble,' the Russian currency -- is known dismissively among Ukrainians as "the coupon." It is to be phased out quickly, barring unforeseen problems.

One reason for the new currency is convenience. A hryvna will replace 100,000 karbovanets, removing most of the population from the ranks of millionaires but making prices a lot easier to post, read, and calculate.

An RFE/RL correspondent in Kyiv recounts:

"Several of the people in line at the banks I visited carried shopping bags of coupons. In Ukraine, money has become a bulky affair in the last several years. The coupon, a currency whose lowest denomination was introduced at one five years ago, quickly became inflated and authorities had to print notes denominated one million.

"People hurried yesterday to pay their utility and telephone bills in the old interval currency, the coupon, unsure of how the conversion would affect payment.

"After four years of coupons, which are quite small and often are compared to Monopoly (play) money by foreigners, the new hryvna banknotes have all the trappings of real money.

"At an exchange point, a man proudly showed me his new five- and 50-hryvna banknotes. 'I think they're beautiful,' he said. "I think it'll be good.' "

Ukrainian authorities dipped deep into the pockets of history to come up with the name "hryvna." A thousand years ago in the medieval Ukrainian state, the hryvna was a silver coin of something less than 500 grams. During the Ukrainian National Republic early in this century, hryvnas were works of art designed by talented artists.

The new hryvna notes come in varied sizes and colors and in denominations of 1, 2, 5, 10, 20, 50 and 100. A hryvna equals 100 kopijky and coins come denominated in 1, 2, 5, 10, 25 and 50 kopijky. The central bank presently is stabilizing the hryvna's value at about 1.76 to the U.S. dollar.

People in Ukraine have awaited introduction of the hryvna since November, 1992. Lack of political will for economic reform as well as financial chaos postponed its introduction.

An important reason for the introduction of the new currency is the hope that it will inspire public confidence in the government's economic reform. Ukraine's underground economy is based primarily on U.S. dollars to evade banking controls and taxes. Some economists believe that the off-books economy is double that of the official gross national product.

"This is the money of distrust," says Viktor Yushchenko, head of Ukraine's National Bank, quoted today in the "Los Angeles Times." He said: "The goal of this reform is to build trust in the national economy."

Victor Pynzenyk, Ukraine's acting deputy prime minister for economic reform, said last week that savings in local currency grew as the date approached for introducing the new currency. It was a sign of trust in the new currency that people sold dollars, he said.

The International Monetary Fund has promised to support a new Ukrainian currency with a loan of $1,500 million if Ukraine pegs its exchange rate to some major world currency or basket of currencies. Negotiations on that arrangement are pending. Yushchenko said that the National Bank has currency reserves to support the hryvna without international help, at least until the end of the year.

Ukrainian and international authorities say that the timing for the new currency is right. The exchange rate has been stable for more than a year. There has been a drop in inflation to less than one per cent. And the local currency was gaining in value.

The economic situation looks less promising. Gross domestic product fell 8.7 per cent in the first half of the year. Western experts say that Ukraine needs to improve its regulatory environment to attract more investment, accelerate privatization, and enforce bankruptcy laws, among other reforms to improve the economy's health.

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