Ukraine Money Coupons Fail to Hold Value

The money-like coupons that Ukraine introduced two months ago to supplant the old Soviet ruble and free the country from Russia’s “economic domination” are falling so rapidly in value that the government on Monday introduced new regulations requiring people to pay their rent and utility bills with them.

In another step toward forcing the ruble out of the Ukrainian economy, the government ordered “all transactions involving the payment of rent for apartments, for utilities, for the telephone and for (other communal services) be made in coupons.”

The move is intended to bolster the coupons’ value in advance of the introduction, expected this summer, of a full-fledged Ukrainian currency, the hrivna. “We made the move because people were complaining and insisting that more opportunities be made available to use coupons since we now pay 70%, and not 50%, of salaries in them,” one official explained.

Ukrainians, already fed up with high prices whether in rubles or coupons, have encountered growing problems with the coupons. Employers, for example, do not always pay according to the government-prescribed ratios.

Vadim Lekhtseir, who teaches physics at the Kiev Polytechnical Institute, last week received all of his salary in rubles. “This is absolute nonsense,” he said. “No one tells you anything in advance, and when they finally do, they don’t give any reasons!”

The “coupon,” as it is universally called and even formally titled, is not the Ukrainian national currency--even though the government is effectively making it legal tender for all kinds of payments and purchases.

“There has been a wide variety of misunderstanding about the role of the coupon,” said George Yurchyshyn, an American banker serving as a deputy chairman of the National Bank of Ukraine. “Originally, it was brought in to supplement the ruble. Then, when there was a practical ruble shortage in Ukraine, it became its surrogate. But people shouldn’t spend too much time defining their separate roles.”

When the coupon was introduced in January, largely to prevent neighboring Russians from raiding Ukraine’s cheaper goods, there was no official mechanism for exchanging it with the ruble, since it was not a currency. But informally, and on the black market, the rate was originally set at 10 rubles per coupon.

Over the last two months, the rate for the coupon has come down dramatically to the point where people are lucky to exchange it on par with the ruble in Kiev, while in cities bordering Russia, such as Dniepropetrovsk, Donetsk and Kharkov, it goes for 20% to 30% less than the ruble.