1996 Ukrainian monetary reform
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The 1996 Ukrainian monetary reform was carried out from 2 to 16 September 1996, and oversaw the replacement of the Ukrainian karbovanets with the new Ukrainian hryvnia in accordance with the Constitution of Ukraine, adopted the same year. Karbovantsi were exchanged for hryvnias at a rate of 100,000 to 1, with exchanges continuing freely until 1998. The monetary reform helped to launch the political career of Viktor Yushchenko, who oversaw it in his capacity as head of the National Bank of Ukraine.
As part of the broader dissolution of the Soviet Union, Ukraine declared independence in August 1991. The declaration of independence noted the necessity of an independent monetary system and currency in order to establish Ukraine's financial and political independence from the Soviet Union. On 9 September 1991, a bill in the Verkhovna Rada (Ukrainian parliament) titled "On Introduction of Reusable Coupons Into Circulation on the Territory of the Republic" passed, which was followed on 10 January 1992 by the National Bank of Ukraine issuing temporary banknotes named "karbovanets",[1] though they were also popularly known as "coupon-karbovanets". The former Soviet ruble continued to be accepted as legal tender until being taken out of circulation on 12 November 1992.[2]
Following its introduction, the karbovanets was initially slightly above parity with the Soviet ruble due to a shortage of supply compared to demand. By April 1992, however, karbovantsi were circulating at such a level that they had reached parity with the former Soviet ruble, and in November 1992 all Soviet rubles were exchanged to karbovantsi in the form of cashless transfers. Intended to last for only four to six months, the karbovanets instead remained in use until 1996, bearing the brunt of inflationary pressures.[3][4][5]
Canada and the United States began to print Ukraine's permanent new currency, the hryvnia, in 1992. Hyperinflation, however, made the introduction of a new currency pointless at the time. By 1993, the level of inflation on the karbovanets had reached 10,000% according to the National Bank. To introduce the hryvnia would cause rapid devaluation and leave it effectively worthless, so the Ukrainian government took the controversial decision to peg the karbovanets to the United States dollar. In doing so, it hoped to establish a sense of stability and trust in the economic situation, by which introduction of the hryvnia would become possible. Over the next two years, more favourable conditions were created by the strengthening of commercial and official exchange rates with the United States dollar.[3]
| 1992 | 1993 | 1994 | 1995 |
|---|---|---|---|
| 208 | 4,539 | 31,700 | 147,463 |
In addition to hyperinflation, the karbovanets struggled from an almost total lack of security measures and poor paper, which enabled the creation of counterfeits by anyone owning a printer. As a result, almost 14 billion counterfeit karbovantsi were present in the economy by 1996. Seeking to counteract these problems, primary aim of the monetary reform was a policy of devaluation, as part of broader measures to establish economic stability with a new currency.[3][4][5]
Hryvnia production
The design for hryvnia banknotes was done by Ukrainian artist and writer Vasyl Lopata during an April 1991 competition for the currency of the Ukrainian SSR. Other participants in the competition besides Lopata included Oleksandr Danchenko, Vasyl Perevalskyi, Volodymyr Yurchyshyn, and Serhii Yakutovych. Lopata's work was displayed before the Verkhovna Rada (Ukrainian parliament) committees on economic reform and culture, being approved by Chairman of the Verkhovna Rada Leonid Kravchuk.[6]
Lopata's designs were sent to Canada in 1992 to be printed by the Canadian Bank Note Company.[7] Coinage was produced by the government of Italy, as well as Luhansk Cartridge Works.[8]