Some of these days, September 2, Ukraine celebrated 16th anniversary of national currency - hryvnia. The years pass, but despite complicated process of introduction, various financial crises over these years and unclear economic situation in the world, Ukrainian currency remains stable enough, and inflation shows negative figures.

It all started in 1990, when declaring its independence Ukraine announced the intention to have its own currency. One month later the intention was stipulated in the law "On economic independence of Ukraine", deputy head of the National Bank Vera Rychakovska told ForUm. After official declaration of Ukraine's independence in 1991, the parliament adopted the resolutions "On name and characteristics of national currency of Ukraine" (10.12.1991) and "On small coins of Ukraine" (02.03.1992), which defined the names "hryvnia" and "kopeck".

According to Rychakovska, "the name of the new currency was not occasional. Our country has long-standing traditions of money circulation: in times of Kievan Rus our ancestors created the first nonborrowed currency system with silver of golden hryvnia as the main currency unit. The second time hryvnia was put in circulation on October 17, 1918."

How it began

Introduction of the national currency was carried out in several stages. First, in January 1992 the temporary money - karbovanetz- was introduced for cash market, while non-cash bank operations were still carried out in USSR rubles. In November 1992 ruble turnover on the territory of Ukraine was officially terminated and karbovanetz became the only legal currency for all types of payment.

Gradually, despite its status of a temporary currency, karbovanetz obtained all characteristics of regular monetary unit and took the heat of economic problems of the transition period: growth of budget deficit, hyperinflation. "At the same time the authorities were discussing further steps of monetary reform to make it a part of the macroeconomic transformation and market reformation," NBU official continued.

The preparation process of monetary reform was complicated. The country needed new banknotes and coins, but it did not have the material and technological base to produce them. At first, the new money was issued abroad. The first samples of small and medium value banknotes were printed in Canada by Canadian Bank Note Co., and coins were minted at Luhansk machine-building plant and the mint of Italy. Banknotes of 50 and 100 hryvnia value were printed in Malta by "Tomas de la Rue" company (Britain). The design of new currency was worked out by famous Ukrainian artists: illustrator Vasyl Lopata and designer Borys Maksymov.

Later on, Ukraine set up its own mint - Banknote printing and minting works and Factory of bill paper in Malin city (Zytomyr region). The first line of the factory was put in operation in March 1994, and mass production started in April 1997. The Mint was launched in April 1998. As of today, Ukraine not only prints its national currency, but also participates in tenders on printing banknotes for other states.

Hryvnia introduction process

Let's go back to history. Efforts of the country's authorities to stabilize economy in 1995 - first half of 1996 created grounds for completion of the monetary reform in September. On August 25, 1996 the President signed the decree "On monetary reform in Ukraine" and ordered to introduce new monetary units - hryvnia and kopeck - starting from September 2. Emission of karbovanetz was stopped, and according to the decree, the old currency had to be withdrawn from circulation by September 16, 1996. As of September 2, 1996 the National Bank issued 338.1 trillion karbovanetz, 19.1 trillion of which were still in banks and the rest was in cash circulation around the country. Within only two week, the NBU managed to withdraw 97% of karbovanetz, introducing at the same time hryvnia banknotes in the amount of more than UAH 3.1 billion.

"The main goals of the monetary reform included introduction of full-fledged monetary unit, change of price scale (with denomination), recovery of monetary turnover. Moreover, the reform was aimed at overcoming disastrous social and economic consequences of money devaluation, at creation of stable monetary system and at making hryvnia the important  incentive of country's development," Rychakovska told. "Considering the time passed since the reform's launch we can surely state that the reform was the starting point of country's progress, including financial stabilization, attraction of cash means into the banking system and maintenance of macroeconomic stability.

Present and future

So, how is hryvnia doing nowadays? According to NBU data, as of August 1, 2012 there were 219.5 billion hryvnias in cash circulation, including 217.9 billion hryvnias in banknotes (or 2.6 billion items). The total number of banknotes per capita made 56 items, and coins - 215 items. The banknotes in circulation are of the third generation, of 2003-07 vintage. "The protection system of these banknotes is of the highest level. Paper bills of medium and high value have holographic images, which cannot be forged with the help of computer or printing equipment. Similar protection is used for euro, dollar and ruble bills," Rychakovaska  noted.

Nevertheless, the National Bank constantly works on improvement of design and protection of banknotes, that's why the forgery rate of hryvnis is one of the lowest in the world. For example, in 2011 there were only 3.4 forged items per one million of banknotes. To compare, last year figures in the EU show 46 forged euro bills.

In 2012, the ratio of cash in circulation to money supply in broad sense (720 billion hryvnias) has reduced to the 10-year minimum - 27.9%. The total amount of cash hryvnia in circulation has reduced by 2.2% amid 2011. Economist Ruslan Pavlenko believes that the above-mentioned factors are positive enough for further growth of the share of non-cash operations, which in turn have important meaning for the financial system of the state.

As for the future prospects, the NBU is working on the program of cash circulation for the period until 2018. The program has three principal tasks: 1) to provide sufficient number of cash; 2) high quality of cash; 3) safe work with cash.

Thus, speaking about cash quality, the National bank continuously works on banknote's endurance, including water resistance. The NBU also regularly replace worn-out bills with new ones. To strengthen operational cash safety the NBU is working on a new system of risk management, with which cash operations will be separated into a special block.

In general, according to Rychakovska, the key function of the Central Bank is to provide stable consumer prices by means of hryvnia's stabilization, as it is the most important condition for economic development and prosperity of the country for years to come.  

Andriy Boyarunets


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