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Ukraine's currency is being bolstered with financial support from other nations


President Volodymyr Zelenskyy says Ukraine is preparing a counteroffensive which could make a Russian defeat, quote, "irreversible." He said that in Germany today just after the German government announced its largest package of military aid for Ukraine, worth more than $3 billion. That aid comes on top of a $2.7 billion grant from the International Monetary Fund, the first such package the IMF has ever given a country actively at war. NPR's Julian Hayda went to a market in Kyiv to see how all this aid is affecting the Ukrainian economy.

JULIAN HAYDA, BYLINE: It's one of those markets that you only really see outside the U.S. - 10, 12 acres of booths, aluminum shacks, canvas roofs, people selling everything from socks to beer to cigarettes to sausage to gravestones to cooking oil to toilet paper to light bulbs. People talk about politics. People play backgammon.


HAYDA: But prices are the main theme here.

LUDMILA STALNA: (Speaking Ukrainian).

HAYDA: Ludmila Stalna (ph) is a vendor here running a booth overflowing with Ukrainian produce. She says before Russia invaded last year, a kilo of onions went for about 30 hryvnia, a little over a dollar in Ukraine's currency at the time. Now Kyiv residents are paying double, as much as 60 hryvnia.

STALNA: (Speaking Ukrainian).

HAYDA: She reminds me that much of Ukraine's agricultural heartland is still under Russian occupation, leading to low supply and high prices. Still, people buy her local foods because it's the only thing that's predictably affordable, unlike the Moroccan pineapples and Turkish avocados she keeps on hand for the rare customer who can splurge.

Several miles away, in a gleaming downtown Kyiv high-rise, I meet economist Ruslan Spivak.

RUSLAN SPIVAK: Everybody in this country has become much more poor since February last year.

HAYDA: Still, Spivak says that things could have been much worse if Ukraine's central bank hadn't made some radical reforms after Russia first invaded Ukraine in 2014.

SPIVAK: We have the - a record high currency reserves which allow Ukrainian National Bank and regulatory bodies to infuse money into the economy when it's really needed.

HAYDA: Spivak says that significant reserves buttressed by funds from Western financial institutions like the IMF and the U.S. Treasury Department have allowed Ukraine's financial system to avoid collapse when Russia invaded again last February. Ukraine's central bank had also fixed the exchange rate of Ukraine's hryvnia. By some estimates, it's worth twice as much as it would be if it were allowed to freely float.

So do you remember that kilo of onions that Ludmila Stalna had at her produce booth? Well, while the sticker price of those onions has doubled, the domestic buying power of Ukraine's currency, because of the central bank's moves, is also relatively stronger than it could have been, meaning that those onions are still pretty affordable, even with poverty on the rise in Ukraine. So while Ukraine's GDP is estimated to have shrunk 40% last year, the actual inflation rate was...

SPIVAK: Close to 20%, plus-minus.

HAYDA: Only 20%. That's a fraction of the inflation rate that some countries, like Turkey, are facing these days and not much more than economic powerhouses, like the U.S. and EU. Spivak says there's another reason why Ukraine's economy beat expectations.

SPIVAK: Everybody start to consume the local production. I see that this intention - definitely patriotic thing.

HAYDA: Using their local currency at home means less of it is being used to buy goods and services from other countries, and that leads to a more stable economy and leaves the government able to focus on the war effort.

Back at the market, I walk into a refrigerated warehouse that's just packed with egg vendors. When I was here last, last fall, there were probably half the vendors operating these stalls. Prices had hit record highs and people were tightening their belts ahead of a brutal winter. Now there are more eggs, and vendor Albina Alheimataseva (ph) tells me the prices have fallen and stabilized.

ALBINA ALHEIMATASEVA: (Speaking Ukrainian).

HAYDA: She tells me every domestic industry is working together to ensure market stability, from the delivery vans to the chicken feed providers, even if it lowers profits across the board.

Julian Hayda, NPR News, Kyiv. Transcript provided by NPR, Copyright NPR.

Julian Hayda
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