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The economic pain is just beginning for Ukraine’s people as the new government embarks on a set of stringent measures meant to keep the banking system from collapsing.
The government, which is struggling to consolidate control after pro-Russian President Viktor Yanukovych was ousted, said on Friday that it would cap withdrawals of foreign currency amid fears of a run on banks and of wealthy citizens fleeing the turmoil.
“Capital controls smack of panic but are necessary to avert a full-blown collapse of the banking sector," said Nicholas Spiro, an expert in international currency and government debt from Spiro Sovereign Strategy. "This is just a whiff of what could be in store for Ukraine if a radical IMF-led reform program is eventually implemented."
The country's currency, the hryvnia, had been in free-fall as investors worry about Kiev's ability to repay its debts. The country’s interim president said Wednesday that $70 billion had disappeared from the country’s coffers, leaving it all but destitute.
One of the first things the new government did after Russia-backed Yanukovych was ousted was to ask for $35 billion in international aid.
On Wednesday, Secretary of State John Kerry said the U.S. would offer $1 billion in loan guarantees as part of a massive assistance package. A previous deal collapsed after Kiev failed to implement international demands for lower gas subsidies, which would have hurt Ukrainians by pushing up energy prices.
However experts say any IMF deal would impact regular Ukrainians' pensions and wages -- and neither side has been talking about the difficult changes needed to keep the country afloat.
"The opposition didn’t prepare their supporters for what is coming," said Lilit Gevorgyan, an analyst with IHS Global Insight. "They chose not to talk about the short-term economic price."