Many exchange offices in Kiev failed to open on time yesterday morning because they had no new banknotes to distribute. Many stores were also closed because shopkeepers did not have enough new money to give out as change.
Nevertheless the hryvna's appearance marks an important step forward in Ukraine's progress to fully fledged statehood. Another milestone was passed last June when parliament adopted a new constitution, replacing an amended version of the 1978 Soviet constitution that had been in force since Ukraine's declaration of independence in August 1991.
In a gesture of Western support for Ukraine, Chancellor Helmut Kohl of Germany arrived in Kiev yesterday for talks with President Leonid Kuchma and his Prime Minister, Pavlo Lazarenko. John Major visited Kiev last April and expressed strong support for Ukraine's independence.
The hryvna bears the same name as a currency that circulated in 1918 during Ukraine's first experiment in independence after the fall of the Tsars. Hryvna is an Old Church Slavonic term for money.
The brief life of the karbovanets, which replaced the former Soviet rouble, coincided with a period of extraordinary economic instability in Ukraine. Annual inflation soared to 10,000 per cent in 1993, industrial output slumped, and Ukraine fell behind Russia in developing financial markets and privatising state enterprises.
Yet the picture has improved over the past year. The karbovanets has held steady against the dollar since December, and inflation fell to a monthly rate of 0.1 per cent in June and July.
Ukrainians have two weeks to exchange their old money for new, with the rate fixed at 100,000 karbovantsi for one hryvna. Mr Lazarenko's government is initially setting the hryvna at 1.75 to the dollar, but may emulate Russia in creating a flexible "corridor" exchange rate. This permits a gradual decline in the currency's notional value, within limits determined by the government's anti-inflationary policies. The strategy has proved a success in Russia since the rouble was placed in a "corridor" trading range against the dollar in July 1995.
Speaking on national television before the currency reform, Mr Lazarenko urged Ukrainians not to be tricked by money-changers into swapping their currencies at an unfair rate. "There is no need to play into the pockets of commercial banks and commercial structures with your rash actions. They seek to make additional profits from everything the government does," he said.
The hryvna's introduction was made possible by help from the International Monetary Fund, which arranged a $867m (pounds 560m) stand-by credit last April in return for a government commitment to introduce market reforms. Ukraine is hoping for a $1.5bn stabilisation fund from the IMF to strengthen the new currency.Reuse content