Money, Money, Money

So! Let's talk money!

The currency here is gryvna/hryvna... and let me tell you- there is MASSIVE devaluation going on in the country right now. When I first arrived in Ukraine in October, the exchange rate was about a dollar to 5.8 Gryvna ("грн." (hrn.))

Now- it's up to 8 hrn to $1!

The salaries aren't going up, nor are prices decreasing; so it's a very bad state for locals. For us, the exchange rate is very favorable and we've been rather shielded from the economic woes of the country. That's not to say that we don't feel its effects.

Let me illustrate-

In order to create stability- many goods are priced in dollars. For example- we pay our rent in US Dollars. We also pay our gym membership in dollars. So imagine our surprise when we went to the bank to withdraw dollars and they flat-out told us that there's a shortage of foreign currency and so there was none available for us to withdraw! A few more visits to banks and we were told the same story over and over until we were finally able to find a bank with some reserves.

So what's causing this economic turbulence?

Debt: Ukraine has been racking up billions of dollars of debt to Russia for natural gas. Putin's been threatening to cut off supplies to the country so the situation is not promising.

Exports: The Ukrainian economy is largely based on steel-wheat-and energy exports and 2 out of those 3 are not doing so well. Steel prices are plummeting and wheat is out-of-season.

Political instability: There is a tug-of-war between Yushchenko and Tymoshenko (rivals for the 2010 election) over policies such as whether or not to allow the Central Bank to repossess homes and cars to pay off debts.

Arun's been commenting on how visibly this economic downturn has been affecting Ukrainians. "They used to eat some borsch and variniki for lunch...... now they're just eating a piece of dry bread!" And for anyone who knows how much Arun loves to eat- you can imagine his empathy!