When the USSR ceased to exist in 1991, tens of millions of Soviet citizens found their lifelong saving wiped out overnight. This bitter legacy of Soviet collapse has been a point of contention ever since, leading to widespread distrust in the banking system.
Yulia Tymoshenko’s BYUT bloc ran in the September 2007 parliamentary elections promising to return savings to those who lost out in the crash, a move which proved immensely popular with voters but led to harsh criticism from opponents, who claimed it was another empty promise.
However, the new government has wasted little time addressing the issue and entered January with Tymoshenko introducing her proposals for repayment to the general public. The initial programme of repayments does not take into account the actual level of savings individuals may have had at the time of the Soviet collapse. Instead, this year’s payments are limited to a fixed amount of UAH 1,000 per person, while the legal heirs of dead depositors are will be able to claim UAH 500. Ukraine’s state-owned Oshchadbank, the Ukrainian successor of the Soviet state bank, began registering citizens on January 8 with fixed cash allocations distributed from the afternoon of January 11 onwards. Large queues began forming at the bank’s branches across Ukraine early on January 11 as thousands of pensioners rushed to be among the first to reclaim a portion of their lost savings.
Payment in kind
Prime Minister Tymoshenko’s campaign committed her government to return UAH 20 billion this year, but much of that total will be paid in kind in the form of public utilities, school fees and the provision of other state services. In a televised address to the nation Tymoshenko explained the part-cash, part services scheme that the government has adopted to meet its campaign promise, adding: “Our task is to organise payments in ways that will not prove inflationary, so that money which is returned to people won’t lose value on their way to the store.” The Cabinet of Ministers is expected to reach a final decision over the structure of other non-cash payments in the coming months, while UAH 12 billion of the funds required to meet payment obligations is expected to come from the government’s planned privatisation programme.
Exchanging Soviet roubles
Communist Party member Oleksandr Holub was one of many opposition deputies to attack the repayments, homing in on the artificial exchange rate of UAH 1.05 to the Soviet rouble which was adopted for use in calculating the current worth of lost savings. “The real value of a hundred Soviet roubles cannot be compared with the value of UAH 100,” he argued.
While criticism over exchange rates is likely to continue, this remains the first attempt to return significant portions of savings to those who lost everything in the Soviet collapse. From 2002 onwards a system was introduced whereby depositors could theoretically receive USD 10, but in practice the process proved extremely complicated while individual banks often did not have sufficient funds to meet payment obligations.
Economist Oleksandr Zholud of the International Centre for Policy Studies alleged that under this old system it was standard practice to transfer money to Oshchadbank branches at the very end of the year, which meant that individual banks couldn’t physically provide candidates with their payments. Memories of these old disappointments have helped to add a sense of urgency to the new Tymoshenko-led scheme, with Oshchadbank officials complaining that people refuse to place their names on lists and instead insist on standing in line at branches, often leading to chaotic scenes.
To counter this sense of panic the new government has issued assurances that the process of registration is without any set time limit and promised that everyone who qualifies will receive their UAH 1,000 this year. Nevertheless such statements are unlikely to pacify a population used to being let down by the government and keen not to miss out again. According to new Finance Minister Viktor Pinzenyk, 155,000 people were registered on January 8 alone.
