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Economy Ukraine was the second-ranking Soviet republic in industrial and agricultural production, after Russia. Long known as the “breadbasket of Europe,” Ukraine traditionally had a highly developed agricultural sector because of its vast, fertile lands. It generated more than one-fourth of the total agricultural output of the Soviet Union. Industrial development was a high priority of the Soviet government. In the 1930s Ukraine experienced a rapid and extensive industrial upsurge, mainly in the mineral-rich Donetsk and Kryvyy Rih regions. Because of Soviet development, which emphasized heavy industry, Ukraine possesses one of the most industrialized economies of Europe. However, its industries are highly inefficient and in pressing need of modernization. The collapse of the Soviet Union brought a dramatic rise in energy costs and a reduction in demand for Ukraine’s products, causing a catastrophic decline in production. The problems were compounded by high rates of inflation and sluggish reforms to increase private ownership of enterprise. In 1995 and 1996, however, inflation was significantly reduced and reforms toward a system based on free enterprise were accelerated. In addition, the United States as well as the International Monetary Fund (IMF) and other international organizations provided large grants and loans. The value of Ukraine’s gross domestic product (GDP) in 1995 was estimated at $35.9 billion. Agriculture, which includes forestry, accounted for 13.2 percent; industry, which includes mining and manufacturing, accounted for 34.4 percent; trade and other services accounted for 36.9 percent; and other sectors, including construction, accounted for 15.5 percent. Currency and Banking In September 1996 Ukraine introduced its new currency, the hryvnia (1.8 hryvni equal U.S.$1, 1996). The currency of the Soviet period, the ruble, ceased to be legal tender in 1992 when it was replaced with a temporary coupon currency, the karbovanets. In 1993 already high inflation reached hyperinflationary levels, with an average annual rate of 4735 percent; however, a strict monetary policy introduced in late 1994 significantly reduced inflation in 1995 and 1996. The country’s bank of issue is the National Bank of Ukraine, founded in 1991 and located in Kyiv.
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