Worried Ukrainians pull money from banks

The government, which must also deal with a political crisis, is struggling to support the hryvna currency in the face of the world financial meltdown, as investor money flees emerging markets and orders fall for the country’s chief export commodity, steel.

Bank analysts say the country should weather the crisis, but some Ukrainians were not waiting to see how it turns out and rushed to empty their accounts. Many people lost their life usavings in the 1991 collapse of the Soviet Union, of which now-independent Ukraine was once a part.

“There were these rumors and I decided not to wait,” said Lyudmila Kudinova, 49, who withdrew 10,000 hryvna from her account at a downtown office of the Khreshchatyk bank Wednesday and immediately converted it into USD 2,000 in US currency. “There is one crisis after another.”

A survey of several ATMs and bank offices in downtown Kiev found no scenes of panic or long lines. Ukraine’s two most troubled banks, Prominvest and Nadra, have imposed restrictions on withdrawals.
Prominvest, which has been taken over by the government, and Nadra, which has survived thanks to a government loan, have limited ATM withdrawals to USD200, according to customers and bank officials.

Several Nadra ATMs had no cash in them on October 15. “Of course I am worried,” said Svetlana, who declined to give her last name. She tried to withdraw 5,000 hryvna (USD 1,000) from an ATM at Raiffeisen Bank Aval in the center of the capital, but was limited to just 1,000 hryvna (USD 200).
Worried savers have taken out some USD 1.3 billion since the beginning of the month but emergency measures from the central bank appear to have slowed the withdrawals. Serhiy Kruglik, head of the foreign relations department on the central bank, said the International Monetary Fund (IMF) delegation will meet with government representatives, review the measures Ukraine has taken so far and consider extending a loan.

“The financial crisis has shaken the whole world and we are no exception,” Kruglik told The Associated Press. “But we have an additional problem: a political crisis.” He said the size of any loan would be decided only after consultations with the IMF delegation.

The IMF’s mission follows the central bank’s freeze of selected retail accounts across the country, limits on loans and measures to stabilize the hryvna. The government has also taken steps to support the country’s core steel and chemical industry.

Government efforts to battle the crisis have been complicated by a deepening political crisis, as Prime Minister Yulia Tymoshenko defied President Viktor Yushchenko‘s order to call early parliamentary elections.

Tymoshenko is fighting to stay in power and avoid a third parliamentary vote in as many years. The central bank continued its struggle to stabilise the hryvna Wednesday, after the currency fell some 20 percent last week. The government intervened and the hryvna recovered some of its losses, but was still down some 12 percent from September. Raiffeisen Bank Aval said in a statement on October 15 that it had received an USD 180 million loan from its Vienna-based parent, Raiffeisen Centralbank Osterreich.

Financial analysts said the banking restrictions were temporary and predicted the country would pull thorough the crisis as the central bank’s emergency measures took effect. “I think the banking system will survive and will emerge not in a bad condition compared to some other countries,” said Oleg Pronin of Dragon Capital Investment Bank.

The Ukrainian stock exchange, which has plunged some 75 percent over the past year, was mixed on early trading on October 15 after closing with a minuscule 0.8 percent gain October 14.

Source of information: New Europe
http://www.neurope.eu/articles/90258.php