Ukraine Begins Compensation Payments For Savings Lost During Soviet Breakup

KIEV, Ukraine -- Thousands of Ukrainians streamed to state bank offices Friday to get full or partial compensation for savings lost amid the 1991 Soviet breakup -- a promise of newly appointed Prime Minister Yulia Tymoshenko that some analysts caution could hurt the economy.

A Ukrainian woman, one of the depositors of the Soviet-era Sberbank, holds her bank book featuring the state emblem of the Soviet Union on the cover, as she fills in documents to receive future compensation payment for her savings lost in the 1991 Soviet collapse, in a bank in the Ukrainian capital Kiev.
The payments, which are to be made by the state bank Oshchadbank, were, however, slow to come. Dozens of anxious people waited in lines in at least three of the bank's offices in the capital, Kiev, on Friday morning and were told by bank officials there was no money to pay them.

Tymoshenko pledged to pay out 6 billion hryvna ($1.2 billion) of the estimated 130 billion hryvna ($26 billion) debt to citizens this year. A precise figure of how much debt has been accumulated can be calculated only after Ukrainians claim their money.

The collapse of the Soviet Union plunged its 15 republics into a deep economic crisis and millions of citizens across the former U.S.S.R effectively lost their savings when their respective state banks froze their accounts and stopped giving out cash.

Tymoshenko made compensating the lost savings a central theme of her campaign for parliamentary elections last year, which swept her to the premiership.

Ukrainians will get up to 1,000 hryvna ($200) in cash for their Soviet-time savings. One Soviet ruble will be equivalent to 1.05 hryvna. Those who held over 1,000 hryvna in their accounts will be able to receive the rest of their money later in non-cash payments, such as vouchers that would offset utility bills, the government says.

Some experts applauded the decision, saying it will restore peoples' trust in the government and benefit the needy, especially pensioners and low-paid government workers.

Oleksandr Klymchuk, an analyst with Concorde Capital Investment bank, said the payments were positive.

"I think that 6 billion in compensation is not a burden for Ukraine's economy, it could bear even more," he said.

But Anton Struchenevsky, an economic analyst at Troika Dialogue investment bank, dismissed the measure as a populist move that would strain the state budget. "Such methods can destabilize the economy and lead to hyperinflation," he said.

The 2008 budget forecasts annual inflation of 9.6 percent, but experts say it could spike to over 15 percent.

Lidiya Polishchuk, an 81-year-old retired train operator, said she was desperate to receive the money. "I need to buy shoes, I need an overcoat," she said.

Source: AP