Historical Sketch

In the Middle Ages, Ukraine had been a center of Slavic statehood. The decline beginning in the mid-14th century led to foreign domination. In the mid-18th century, Ukraine was partitioned between Russia and the Habsburg Empire. After the outbreak of the Russian Civil War end-1917 immediately triggered a proclamation of autonomy of the eastern Ukraine, then independence early 1918. Quickly emerged three rivalling Ukrainian governments, the National Republic (under the rule of the Central Council, then the Directory under Simon Petlyura), the Ukrainian State (under the rule of Hetman Pavel Skoropadski), and the Soviet Socialist Republic. Ultimately, the Bolshevists prevailed during 1919 and aligned with Soviet Russia. In Western Ukraine, the downfall of the Habsburg Empire also triggered a proclamation of independence, with the idea of joining the eastern part. But by 1920, Western Ukraine had been annexed by its neighbours Poland (Galicia), Romania (Bukovina), and Czechoslovakia (Carpatho-Ukraine), all successor states of Habsburg Austria. In 1922, Russia joined with the three states of (Eastern) Ukraine, Belarus, and Transcaucasia to form the Union of Soviet Socialist Republics (USSR). During World War II, Germany occupied the western part of the Soviet Union. Two administrative units were created by the military command, the "Reichskommissariat" Ostland (Baltics and Belarus) and Ukraine. During 1944, the territory got recaptured by the Red Army. After the war, the previous annexation of the Western Ukraine was reverted and the territory was integrated into the Ukrainian Soviet Republic and the USSR. With the dissolution of the USSR, Ukraine attained independence in 1991. In 2014, Russia conquered and annexed Crimea peninsula, a move not recognized by neither Ukraine nor internationally. Subsequently, Ukraine lost control over the eastern borderlands to Russia, which unilaterally declared independence, again not recognized, and finally adhered to Russia in early 2022. Briefly afterwards, Russia attacked Ukraine with the intention to overthrow the government and to establish control.

Monetary History Overview

The newly created Ukrainian state inherited the monetary chaos of Civil War Russia. End of 1917, the parliament passed a resolution for the issuance of state paper money. The 1st Ukrainian Karbovanets, was nominally a gold currency in the Russian standard of 1897. In fact, it constituted another type of unbacked paper money crculating on the territory of the former Russian Empire. In March 1918, the parliament passed another monetary resolution. The 1st Ukrainian Hryvnia was to become new currency unit. Like the Karbovanets, it was a nominal gold currency, now equal to half a Ruble of 1897. In the following the government of the Ukrainian National Republic issued paper money in both denominations. At the same time, the Ukrainian State government issued a few Hryvnia notes, while the Ukrainian Socialist Soviet Republic authorities produced (unissued) Karbovanets notes. The victorious Bolshevists tried to limit the circulation by demonetizing all previous notes in May 1920. Russian notes and newly issued local notes filled the gap. But since the withdrawal of the old notes was ineffective, the final remediation came only with the 1924 Soviet currency reform. During German occupation of the western Soviet Union, a special monetary order was established for the so-called "Reichskommissariat Ukraine", unique among all occupied territories. The Central Currency Bank of Ukraine began operations in July 1942 and issued the 2nd Ukrainian Karbovanets, pegged to the German Reichsmark, gradually replacing the general occupation (Reichskreditkassen) money. When the Red Army re-conquered Ukraine during 1944, the occupation currency quickly disappeared again.

With the independence declaration of 1991, Ukraine immediately set out to create a national currency. In fact it was encoded in the first constitution. However, the post-soviet economic turmoil rendered that impossible. Instead a three-phases transition was started that began with the issuance of an interim (coupon) currency on par with the Soviet and Russian Ruble and circulating alongside, the 3rd Ukrainian Karbovanets introduced in mid-January 1992. The second phase began when the Karbovanets got unpegged from the Russian currency in November 1992, when also the Soviet and Russian notes were withdrawn within a week. The Karbovanets immediately depreciated against the Russian Ruble and went hyper-inflationary afterwards, so that the start of the third and final phase of the transition had to be delayed. In September 1996, finally, the economic conditions had stabilized enough, but the value of the Karbovanets against hard currencies had gone down to 0.3% of where it had been at the start of phase two. At the re-denomination, five zeros were cut, and the 2nd Ukrainian Hryvnia became the new currency unit. The currency lost 75% of its value until the end of the decade, then stabilized during the 2000s until a 33% devaluation was done end-2008, which was the starting point of a period of relative currency stability. The political instability and the conflict with Russia in the mid-2010s have initiated another round of depreciation. On the day of the Russian attack in 2022, the Hryvnia got pegged to the US Dollar and had to be devalued by 20% about half a year later.

Ukraine joined the International Monetary Fund (IMF) on 03.09.1992.

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