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Ukraine begins compensation payments for savings lost during Soviet breakup

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Posted: January 11, 2008 2:34 p.m.
Updated: January 26, 2008 5:00 a.m.
    KIEV, Ukraine — Thousands of Ukrainians streamed to state bank offices Friday to get compensation for savings lost in the 1991 Soviet breakup — a promise of new Prime Minister Yulia Tymoshenko that some analysts caution could hurt the economy.
    The payments by the state Oshchad bank were slow to come. People across the country stood in long and impatient lines.
    An administrator at a Kiev branch of the bank suffered a head injury when an angry crowd pushed her to the floor. A retiree in the central Zaporizhia region died of a heart attack as he waited in line to receive the money, local authorities said.
    Tymoshenko pledged to pay out $1.2 billion of the estimated $26 billion debt to citizens this year. The remainder will be paid out over the next several years, the government said. The exact amount of the debt will be calculated once citizens claim the money.
    The collapse of the Soviet Union plunged its 15 republics into deep economic crises and deprived millions of citizens across the former Soviet Union of their savings.
    Tymoshenko made compensating for the lost savings a theme of her campaign for parliamentary elections last year, which swept her to the premiership.
    Ukrainians will get up to 1,000 hryvna — the equivalent of $200 — in cash for their Soviet-era savings. Those who held over 1,000 hryvna in their accounts will be able to receive the rest of their money later in non-cash payments, such as vouchers that would offset utility bills or be used to pay for some consumer goods, the government says.
    Oleksandr Klymchuk, an analyst with Concorde Capital Investment bank, said the payments were positive.
    ‘‘I think that 6 billion (hryvna - the equivalent of $1.2 billion) in compensation is not a burden for Ukraine’s economy; it could bear even more,’’ he said.
    But Anton Struchenevsky, an economic analyst at Troika Dialogue investment bank, dismissed the measure as a populist move that would strain the state budget. ‘‘Such methods can destabilize the economy and lead to hyperinflation,’’ he said.

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