(MENAFN- The Peninsula) Ukraine came under increasing economic pressure from a collapsing currency and a threat to its gas supplies from the Kremlin yesterday, just as a long-awaited ceasefire took hold in the east.
As the truce appeared to be coming into force, the Ukrainian army reported no combat fatalities in the past 24 hours, but the news did nothing to halt a currency slump that forced the central bank to ban most trading before intervening to prop up the hryvnia.
With the hryvnia currency in free fall as investors flee, the central bank called a halt by banning nearly all commercial currency trading until the end of the week.
It later jumped into the market to buy dollars, reversing a free-fall in the hryvnia that it called "irrational".
Prime Minister Arseny Yatseniuk said the ban was bad for the economy. He had learned about it on the Internet and would demand an explanation from central bank chief Valeria Gontareva. Gontareva said there was no fundamental reason for the panic in the currency market.
At the day's end the central bank announced it had bought $80m at an official rate of 28.046 to the dollar, close to the rate at the start of the week and 12.8 percent higher than the close after a plunge on Tuesday. Exchange kiosks in Kiev were selling limited amounts of dollars for 39 hryvnias, around 20 percent worse than rates advertised in the windows of commercial banks where dollars were not available.
A construction worker exchanging dollars at a kiosk in a grocery shop in return for a bag filled with thousands of hryvnia, laughed and told shoppers: "Soon we will have to walk around with suitcases for cash, like in the 1990s."
The hryvnia has lost at least half its value so far this year after halving over the course of 2014.
In a potential new blow, President Vladimir Putin warned that Russia would halt gas supplies to Ukraine, for the fourth time in a decade, if Moscow did not receive advance payment. That could disrupt flows to Europe, which receives around a third of its gas from Russia, with 40 percent shipped via Ukraine. However, Russia cut off gas to Ukraine for six months last year without affecting Europe.
Criticising Ukraine for cutting off gas to eastern regions under the control of the pro-Russian separatists, Putin said: "Imagine these people will be left without gas in winter. Not only that there is famine ... It smells of genocide."
"We hope ... that gas supplies will not be interrupted. But this does not depend only on us, it depends on the financial discipline of our Ukrainian partners," Putin said.
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