Finance minister assures investors of Ukrainian market's stability

by Roman Woronowych
Kyiv Press Bureau

KYIV - The Ukrainian financial market will be able to withstand the monetary collapse of the Russian ruble, Ukraine's minister of finance assured the public and the international community on August 18.

"The government of Ukraine and the National Bank of Ukraine will take all necessary measures to stabilize the national financial market," said Minister of Finance Yurii Mutiukov.

Nonetheless, the hryvnia, besieged by a depleted monetary reserve fund caused by the government's inability to collect revenue and hard currency, and affected by the financial collapse in Asia as well as Russia, continued to fall after the finance minister's statement.

In one day, the trading value of Ukraine's currency, the hryvnia, dropped by 7 percent, even as the National Bank of Ukraine attempted to prop it up.

Seeking to reassure international banks that have invested in Ukraine's treasury notes, Finance Minister Mitiukov said, "In purely technical terms, the Finance Ministry can accommodate all of its debt commitments in any [type of] currency within days, if needed."

Viktor Yuschenko, chairman of the National Bank of Ukraine, was more forthcoming about possible developments of this situation in the economy when he said, "If the crisis in Russia continues to deepen, then we have to understand that reasons may exist to change our current strategies."

In trying to bolster investor confidence in the stagnant Ukrainian economy, Mr. Yuschenko explained that Ukraine has sufficient reserves to make 1998 payments on its debts.

"In the current situation what is most important is that the psychology surrounding the financial markets of Ukraine must be changed," said Mr. Yuschenko, adding, "I want you to accentuate that we are not planning any major adjustments to our monetary policies."

The government of Ukraine has increasingly turned to the West to sort out its post-Soviet bureaucratic inconsistencies and borrowed on the international short-term credit market at rates approaching 40 percent. But, with interest rates flying even higher into the stratosphere and overstressed by the defaults of many Russian banks, and Russia's de facto 33 percent devaluation of its ruble, the Ukrainian currency has felt a drop that will make it more difficult for the government to make good on what it owes.

Finance Minister Mitiukov made it clear that the West has not abandoned Ukraine. "We are currently, and will continue to work with NG Barrons, Nomura and Chase Manhattan," said Mr. Mitiukov.

Those banks, to which Ukraine has become heavily indebted, are among the leaders in the intricate international lending system that makes decisions on the future possibilities of international currencies.

Copyright © The Ukrainian Weekly, August 23, 1998, No. 34, Vol. LXVI

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