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By Robert Seely
The Moscow Times, Moscow, Russia
Friday, November 13, 1992
Front Page Story
Kiev... President Leonid Kravchuk of
Ukraine decreed Thursday that the republic was leaving the
ruble zone and replacing the Russian currency with a "beefed-up"
Ukrainian coupon.
"In introducing the national currency,
Ukraine enters a new stage in the creation of its statehood:
it acquires the status of a nation that fully controls its
economic fate." Kravchuk said on Ukrainian television Thursday
evening.
Kravchuk decreed that the ruble would
cease to be legal tender in Ukraine, the second most populous
of the former Soviet republics, from 11 P.M. Thursday night.
"It is ordered that the only legal means
of tender in the territory of Ukraine is the Ukrainian Karbovanets,
released by the national bank of Ukraine," the decree stated.
The coupon, or karbovanets, has been
circulating as a cash currency since January. But the Kiev
government has continued to issue rubles in the form of bank
credits, infuriating the Russian government.
Ukraine's permanent exit from the zone
is likely to be greeted by a sigh of relief by Russia's Central
Bank, which has complained bitterly about the Ukrainian willingness
to issue credits "on the Russian tab."
This year, according to the prime minister,
Leonid Kuchma, Ukraine has emitted more than 700 billion rubles
in government credits to state enterprises, boosting inflation
both in Ukraine and Russia.
Ukraine effectively dropped out of the
ruble zone for several weeks because of the suspension of
bilateral banking agreements with Russia, but the divorce
is now permanent. This was the last stepping stone on the
way to a full national currency, the hryvna.
It is widely thought unlikely that the
hryvna will be introduced for anything up to six months. However,
commercial banks have been ordered not to engage in money
transactions Friday, prompting speculation that the decision
to introduce the hryvna, which has been sitting in the national
bank's vaults for several weeks, might be taken by the weekend.
President Kravchuk favors early introduction
of the currency, more for reasons of political status than
of economy expediency. The chairman of the national bank,
Vadim Hetman, argues for a gradual transition to the hryvna.
By transforming ruble accounts into
weaker coupons, Kravchuk has effectively devalued them by
anything upwards of one-third. Although it will make Ukrainian
goods cheaper, the devaluation will push up the price of Russian
energy imports and raw materials.
As a result, the decision to leave the
ruble zone was unpopular with the majority in parliament and
its constituency, an influential group of former Soviet managers.
But political pressures have made the move inevitable.
In the short term, the lackluster coupon--cynically
described as the only currency more wooden than the ruble--is
likely to slide further against the dollar and the Russian
currency. The coupon dropped to 600 against the dollar last
weekend--a month ago it stood at 400.
Kravchuk told Ukrainians, however, that
they would not lose money under the monetary reform.
"There are no ground to worry," he said
during his television address.
Some businessmen in the republic are
welcoming the complete break from the ruble in the hope it
will make Ukraine's government more circumspect in its financial
dealings. "It's likely to make them more responsible," said
Tim Bloomfield, an accountant with Ernst and Young.
Holders of ruble bank accounts have
three days in which to exchange rubles for karbovanets. After
that, the National Bank will set a rate for the karbovanets
allegedly to be based on a floating rate. Although that rate
is likely to begin at 1.5 coupons to the ruble, it may drop
further in the short term, especially at the prime minister
has predicted another bout of inflation.
"The black market rate, advertised by
street money changers outside the TSUM department store in
Kiev's city center, has dropped from 6 rubles per coupon in
January to 1.5 coupons per ruble Thursday.
NOTE: ArtUkraine was in Moscow in November
of 1992 and obtained a copy of The Moscow Times. We just found
the copy recently when we were cleaning out some boxes of
old material and noticed the article about the ruble. ArtUkraine
flew from Moscow to Sumy, Ukraine on the first visit ever
for ArtUkraine to Ukraine during November of 1992.
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