Ukraine’s central bank has jacked up its main interest rate to 19.5 percent from 14 percent trying to avert financial collapse, brought ever closer by fighting in the country’s east and a lack of foreign funding.
It is also trying to put a lid on annual inflation which hit almost 25 percent in December.
Some analysts say unless there is a ceasefire with pro-Russian rebels, foreign financing from the International Monetary Fund or elsewhere will be difficult to secure.
The former Soviet republic desperately needs funds from donors to fill an estimated $15-billion (20 billion euro) funding gap to withstand the financial crisis, deepened by a surge in fighting in eastern regions.
With the value of the hryvnia currency rapidly declining and foreign exchange reserves running out, Ukraine’s central bank has few ways to revive a near bankrupt economy.
The central bank’s efforts to secure the economy are not seen as standing much chance of success. “It’s more about economic failings and the war situation at this stage. Interest rates won’t make any difference, just as they are not (making a difference) in Russia,” said Simon Quijano-Evans head of emerging market research at Commerzbank in London.