Ukraine’s currency, the hryvnia, plunged overnight leaving citizens scrambling to stockpile food, electronics, and whatever else they could this morning in a desperate effort to purchase something tangible with their rapidly declining currency. The currency has fallen by more than 70 percent in the past year.
The cost of goods are rising dramatically and many stores across the country have imposed rationing to cut down on stockpiling. Markets are limiting each customer to the following:
- 2 bottles of oil
- 2 packs of buckwheat
- 5 kilograms of flour
- 5 kilograms of sugar
Currently they have not imposed rationing on bread, rice, potatoes, meat, or dairy, but that could come very soon.
So many Ukrainians were exchanging their hryvnias for dollars and euros that the Central Bank put a stop to currency exchanges in order to prevent any further runs on the banks.
The Prime Minister of Ukraine, Arseny Yatsenyuk, expressed his dissatisfaction with the decision to halt currency exchanges, “This morning I learned that the NBU on its own, without consultation, decided to close the interbank market that surely doesn’t add stability to hryvnia.”
All of this follows major volatility with the Danish Krone and Swiss Franc, and an even larger shakeup with what happened in Russia last month when the ruble was in the midst of its precipitous decline. IKEA and Jaguar in Moscow sold out of everything in the week following the biggest drop in the ruble’s value. Russians were frantic to buy something tangible while they still could. The ruble has since stabilized with the price of oil, but further declines could call for drastic measures from the Russian Central Bank. Some analysts believe Russia could make a move to back the ruble with gold and that is part of the reason why the country has been stockpiling so much gold over the past year.
The new exchange rate means that the minimum wage in Ukraine equals less than $43 per week. That is lower than the minimum wage in Ghana and Zambia.
Confidence in the economy is shaky at best as many believe that full-scale war is inevitable at this point. A recent cease-fire deal between the Russian separatists and government in Kiev failed almost immediately and new shipments of weapons and troops are beginning to arrive from the U.S., UK, and NATO.
UPDATE: This is what’s happened to the price of gold in Ukraine: