On Wednesday 25th February there were no registered trades in Ukraine, leaving the currency effectively in limbo.
According to Reuters, the previous day, the central bank had reported trades had fallen 11 percent against the dollar.
Exchange kiosks on the streets in Kiev were selling limited amounts of dollars for 39 hryvnias, around 20 percent worse than the rates advertised in the windows of commercial banks where dollars were not available. This compares to the official rate of 33 USDUAH posted yesterday, a rate which will continue in freefall, now that the central bank has no more gold left to sell (it’s mysteriously gone), and virtually no foreign reserves.
Following the closing of the FX market closing, the central bank has been able to artificially dictate the interbank rate, which it reduced from 32 to 24 hryvnias as of 12:45 p.m. local time. The artificial rate only affects exporters, who are forced to sell 75 percent of their foreign currency revenue to the National Bank at the rate.
Even the Ukraine government is shocked by what is going on: “I learned this morning on the Internet that the National Bank of Ukraine has, as usual on its own without any sort of consultations, made the decision to close the interbank currency market, which will absolutely not add to the stability of the national currency that the national bank is responsible for. This situation has a very complex and negative influence on the country’s economy,” Ukrainian Prime Minister Arseniy Yatsenyuk said.
The Ukrainian National Bank chairwoman Valeriya Hontareva, however, contradicted the Prime Minister’s statement. “We coordinate all administrative measures with the International Monetary Fund first, and only then implement them,” Hontareva told reporters.
In short: total chaos, which is indicative of any country’s collapse into the hyperinflationary abyss.
It gets better. According to RIA, on Tuesday, Ukrainian television channel Ukraina announced that with the new exchange rate, the minimum wage in Ukraine stands at around $42.90 per month, which according to the channel, is lower than in Ghana or Zambia. There are currently no plans to raise the minimum wage until December.
Behold hyperinflation: “Food prices among producers rose 57.1 percent, with the price for grains and vegetables rising 91 percent from January 2014 to January 2015, while the official inflation rate over the period totaled 28.5 percent. Meanwhile, Ukrainian consumers responded to economic difficulties by cutting their spending in hryvnias by 22.6 percent, which amounts to an almost 40 percent decrease in real consumption.”
And the punchline: “A construction worker exchanging dollars at a kiosk in a grocery shop in return for a bag filled with thousands of hryvnia, laughed and told shoppers: “Soon we will have to walk around with suitcases for cash, like in the 1990s.””
Which is ironic, because the central banks of “developed world” nations, most of which are now facing over 300% debt to consolidated GDP, would define Ukraine’s imminent hyperinflation with just one word: “success.”