A Virtual Iron Curtain

Editor's Note: Nadiya Pustovoytova is Acting HR administrator in the IFC Ukraine country office and a Program Assistant for the corporate governance business line in the Eastern Europe and Central Asia region. Nadiya will be adding a new angle to coverage of the financial crisis in the Crisis Talk blog with a "view from the field." Welcome!

Financial issues that were quite abstract and distant at the beginning have now become quite concrete for an ordinary person in Ukraine.

The US dollar is over 1.6 times more expensive today than it was in the summer (UAH 7.38 compared to 4.54), and this last week the exchange rate has deteriorated 0.1-0.15 every day. Besides, it’s close to impossible to purchase dollars. There are many currency exchange booths in the streets, but since the beginning of November it’s hard to find dollars or Euros. If you’re lucky you can find dollars in the banks, but you’ll have to pay a commission of up to 7 percent of the amount exchanged.

It’s a flashback to the early nineties – we again have people trading foreign currency in the streets of Kyiv! And in this “shadow” trade, you don’t get any receipts. Not that I normally need dollars or Euros, but if I'm traveling abroad I have to figure out how to pay for the hotel, meals, transport, etc. What makes me sad is the almost visible existence of a virtual “iron curtain” – a person’s inability to freely purchase the amount of foreign currency he or she needs at the authorized point at a fair price. People who borrowed in US dollars – for example, took their mortgage loans or credits at the commercial banks – are now also in trouble. The debt collectors will definitely have enough work or, I should say, enough headaches in the following months.

The prices for real estate have fallen by 25-30% from a year ago. The volume of work for real estate agents has also decreased. The banks have stopped granting mortgage loans and any other significant loans to individuals, limiting their credit services for citizens to micro-loans. People can’t afford to purchase apartments any more. At the same time, the price of leasing 1-3 room apartments in Kyiv has fallen by 15.95% in November alone. Sounds like good news for potential lessees, but the problem is that these prices are normally fixed in USD.

These are only a few of the implications of the financial crisis for an ordinary citizen in Ukraine. Other things are also quite standard – people get sacked or have to take unpaid vacations, salaries are delayed, bonuses cut, and some companies have introduced reduced working hours. I feel pity for the people who are fired as though they were “leaving by their own wish” because the employer instructs them to. The analysts forecast that next year the unemployment rate in Ukraine may reach 8% of the working age population.

One good thing this financial crisis has brought us, though, is a huge number of jokes. As long as people are laughing there’s still hope that it’s not as bad as it seems…