September marks 18 years since Ukraine adopted its national currency, the hryvnia. Ukrainians first began using the hryvnia under Kuchma, when the decree "On Monetary Reform in Ukraine" was issued in 1996. This important step in the development of the country's financial system was preceded by a turbulent era of vouchers and coupons. Back then, Ukrainians experienced firsthand what it meant to become a "millionaire." Bicycles and strollers were purchased for millions, and electricity and water bills were paid for millions.
The hryvnia has depreciated sevenfold over its 18-year existence. In 1996, the hryvnia exchange rate to the dollar was 1,82; in August 2014, the hryvnia hit a record low several times, trading at 13,90 against the dollar. On the black market, the price reached as low as 14,20. Thus, Ukraine's post-Maidan authorities devalued the national currency by more than 60%.
Neither IMF tranches, which the fund is in any hurry to issue, nor a total ban on the sale of foreign currency will save the situation with the national currency.
The culprit is the virtual standstill of Ukraine's industry. Industries such as mechanical engineering, metallurgy, and the chemical industry no longer contribute to the state treasury. Foreign investment is completely out of the question. No one will invest in a country torn apart by civil war.
International rating agencies are issuing more than bleak forecasts. Fitch has downgraded Ukraine's long-term foreign currency default rating outlook from "B-" to "CCC." This confirms Ukraine's long-term foreign currency issuer default at the "CCC" level.
The decline in GDP by the end of the year will be 6,5%.
The total amount of public and publicly guaranteed debt of Ukraine as of July 31, 2014, was $69,226 billion. For example, in January 2014, the volume of public and publicly guaranteed debt was $23,1 billion, and in February – $20,3 billion.
The inflation forecast for the current year is 9,5%, for 2015 – 12,5%, and for 2016 – 6%. The Ministry of Finance, however, is less optimistic, reporting that inflation in the country will accelerate to 19-20% in 2014.
The plummeting economy is hitting ordinary Ukrainians first and foremost: the halted industry, and the coal mining industry in particular, is already promising long winter evenings without power or heating.
Exorbitant utility bills will send shivers down the spines of families living on state payrolls. Pensions, social benefits, and public sector salaries in Ukraine, which is living under the new system, are being paid without the bonuses that were in place under dictator Yanukovych.
Many are talking about a kind of “third Maidan,” in which people will allegedly come out driven to the brink by their social position.
So, everything so far suggests that no one is planning to go anywhere. Simply because they won't be invited. Mustafa Nayyem won't tweet about holding a public meeting to address the widespread cold and hunger. Ruslana won't throw "wild dances" over children freezing in unheated schools.
The only silver lining to Ukraine's economic collapse is that the power outages will make people watch less TV. Maybe they'll even pick up books. By candlelight. And maybe they'll even get smarter.
Melnikova Lyubov, The country's elite
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