Economic Woes: The Uncertain Future of Ukraine's Finances

http://www.spiegel.de/international/europe/ukraine-facing-financial-instability-but-imf-may-help-soon-a-956353.html



With rapidly shrinking currency reserves and a capital flight problem, Ukraine faces an uncertain financial future. The IMF plans to send a "fact-finding mission" to Kiev next week, but will it be enough?

Economic Woes: The Uncertain Future of Ukraine's Finances
By David Böcking
February 28, 2014 – 04:37 PM

Stepan Kubiv, 51, looks as earnest as one would expect for the president of a central bank. Yet in Kubiv's case, he has only held his office as the governor of Ukraine's national bank since Monday. Prior to that, he was a "commandant" of Ukraine's Euromaidan opposition movement, which managed to topple President Viktor Yanukovych. Now Kubiv must take up a different battle -- keeping his country from financial collapse.

On Wednesday, Kubiv noted that his country's foreign currency reserves had dropped from $17.8 billion (€13 billion) to $15 billion just since the beginning of February, as the national bank attempted to prop up the exchange rate of the country's currency, the hryvnia. Those efforts met with little success, and the hryvnia has fallen to a record low against the dollar.

And that's not Kubiv's only woe. Despite Ukrainian banks limiting cash withdrawals from ATMs, the central bank president says customers withdrew around $3 billion just during the three days of street battles last week, an amount equivalent to 7 percent of all deposits. On Friday, Kubiv announced that foreign currency withdrawals were being further limited to 15,000 hryvnia ($1,500) per day in order to calm the current volatility.

Ongoing instability on the Crimea Peninsula has also not helped, with global stock exchanges hit hard on Thursday. Furthermore, the VTB on Thursday became the second major Russian bank to announce it was reducing its lending in Ukraine, which could cause businesses in the already economically stricken country to soon run out of cash. "Ukraine's banking sector appears to be destabilizing considerably," says Stefan Bielmeier, head economist at Germany's DZ Bank.