20 Hryven (Victory in the Great Patriotic War) – Ukraine

In 2005, Ukraine’s currency situation was defined by a period of remarkable stability and strength for the hryvnia (UAH), following the tumultuous economic reforms and volatility of the late 1990s and early 2000s. The National Bank of Ukraine (NBU) maintained a managed float exchange rate regime, successfully keeping the hryvnia tightly pegged at approximately 5 UAH to 1 USD for the entire year. This stability was a key achievement of President Viktor Yushchenko’s new government, which took power after the Orange Revolution, and it bolstered business confidence and helped curb inflation.

The stability was underpinned by several factors, most notably strong export revenues from steel and chemical industries amid a favorable global market, which led to a significant current account surplus. Furthermore, substantial foreign direct investment inflows and growing remittances from Ukrainian workers abroad increased the supply of foreign currency. The NBU actively intervened in the market to purchase excess foreign currency, which allowed it to build up international reserves robustly, reaching a record high of over $19 billion by year’s end, more than doubling from the start of the year.

However, this stable facade concealed underlying vulnerabilities. The economy remained heavily dependent on a few cyclical export sectors, making it susceptible to global price shocks. Additionally, the fixed exchange rate, combined with loose fiscal and credit policies, contributed to a rapid growth in domestic demand and imports, which began to widen the trade surplus. Economists warned that maintaining the peg was becoming increasingly costly for the NBU and risked fueling inflation, setting the stage for the pressures that would challenge the currency in the coming years.