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1 September 1998
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President Kuchma: Hryvnia Corridor Will Change

On September 1, Ukraine's President Leonid Kuchma visited a new military college opened in Boyarka, Kiev region. Mr. Kuchma congratulated the new cadets on the start of the new academic year. The military college admitted 200 students this year; 305 of their tuition and accommodation fees will be paid by the Youth and Family Ministry. The opening ceremony was also attended by Defense Minister Oleksandr Kuzmuk, Education Minister Mykhailo Zgurovsky, and Kiev regional administration head Anatoly Zasukha. Speaking to reporters, President Leonid Kuchma said that the exchange rate corridor set for the national currency, the hryvnia, would be changed slightly as soon as the IMF approved an EFF loan of 2.2 billion dollars. He disclosed that the International Monetary Fund's board of directors would make a decision on the loan later this week. Mr. Kuchma, however, said that the change to the corridor will "in no way be a big change.'' The hryvnia has been under pressure ever since Russia devalued the ruble last month. Russia accounts for nearly 40 percent of Ukraine's foreign trade. The trade band was set at 1.80-2.25 hryvnia per dollar until the end of the year, to protect investors against currency risk. The currency closed on August 31, at 2.2500 per dollar, the very limit of the exchange rate corridor. Mr. Kuchma emphasized that changing the exchange rate corridor will not amount to a collapse of the national currency.

President Kuchma’s Telephone Conversation With IMF Managing Director Camdessus

Ukraine's President Leonid Kuchma has held a telephone conversation with International Monetary Fund's Managing Director Michel Camdessus. According to the Ukrainian presidential press service, the two men discussed further cooperation between Ukraine and the IMF, particularly provision of a loan to Ukraine under the IMF's Extended Fund Facility loan program. Mr. Camdessus stated the IMF's support for the Ukrainian government's efforts to stabilize the Ukrainian economy.

President Kuchma met with the heads of Ukraine's leading banks on August 31 to discuss the situation on the Ukrainian currency market in connection with the current international financial crisis. The joint efforts of the government and the National Bank of Ukraine aimed preserving economic and political stability in the country were noted at the meeting. The ongoing conversion of government internal loan bonds into long-term government bonds was declared a success. The conversion is aimed at relieving the pressure on the state budget and freeing funds for financing social programs. The bankers noted that the economic situation in Ukraine differs considerably from the situation in Russia thanks to a large extent to President Kuchma's economic decrees issued last summer. They told Mr. Kuchma that Ukrainian commercial banks are also taking measures to facilitate smooth operation of currency exchange bureaus. Mr. Kuchma stressed the need to create the necessary conditions to ensure that foreign investors and creditors remain on the Ukrainian market.

Ukraine Makes Bond Conversion Offer To Foreign Investors

The Ukrainian government on Monday said it would ask foreign investors to convert their government internal loan bonds (OVDPs) into longer-term paper, to be repaid in dollars. According to the Cabinet of Ministers' press service, the conversion of hryvnia- denominated OVDPs is voluntary. At least 80 percent of foreign holdings will have to be offered up for the conversion to take place. Details on the yield on the new bills have not been released. A similar conversion deal with domestic banks guaranteed a yield of 40 percent for the first 12 months, after which yields would be determined by the market. The government statement said short-term debt issued in 1997 and 1998 would be converted into longer term debt, maturing on September 22, 2000 and December 22, 2000. According to the Cabinet of Ministers, the conversion will not exceed four billion hryvnia in volume. Finance Minister Ihor Mitiukov said last week that foreign investors hold about 1.8 billion hryvnia (16% of the market) in Ukrainian OVDPs.

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