Currency manager: National Bank of Ukraine

Decisive actions to cut currency denominations while upgrading notes and coins are starting to pay off

Ukrainian hryvnia banknotes
Photo: Yelyzaveta Serhiienko/NBU/Flickr

The hryvnia, the national currency of Ukraine, was introduced in the early 1990s after the break-up of the Soviet Union. Despite a rapidly changing payments landscape, little changed in the management of the country’s banknotes and coins until 2014, when the central bank undertook a major institutional shake-up. 

The catalyst was the appointment of Valeria Gontareva as governor of the National Bank of Ukraine (NBU). She let the hryvnia (1 hryvnia = 100 kopiikas) float to meet International Monetary Fund requirements to establish a more realistic foreign exchange rate – and within the next 12 months, the hryvnia lost about 70% of its value against the US dollar. 

At this time, the NBU also took the decision to overhaul both its coin and banknote series – an ambitious move, given most countries tend to add or remove a single note or coin denomination at a time. The NBU determined to reduce the number of denominations in circulation from 16 to 12. 

“Compared to other countries in the region, we had too many denominations. So we looked globally at what was viewed as best practice, and aligned our new series,” says Oksana Galyts, deputy director of the Cash Circulation Department.

The NBU consulted international peers, such as the Czech National Bank, which removed certain coin denominations in 2003, as well as Scandinavian institutions, which issue fewer denominations versus the international average. In most countries, five or six denominations circulate: in many Scandinavian countries, denominations average at four. 

“The most useful discussions were with the commercial banks. We asked them which denominations were used the most, which were the most costly to handle and which they felt would have the most benefit to the public,” explains Galyts. “Ultimately, we went with their decision.” 

The NBU also conducted extensive surveys with members of the public, of which 90% said they supported the decision to withdraw the smallest denominations from circulation.

Reducing numbers

The lifespan of Ukraine’s currency played a major role in determining which denominations needed to be removed from circulation. Low-denomination banknotes (the 1, 2 and 5 hryvnia) on average lasted less than a year in circulation before having to be removed. Coins, meanwhile, have a lifespan of between 20 and 25 years. As a result, the NBU converted the four smallest-denomination banknotes into coins. This also included the 10 hryvnia banknote, which had a slightly longer lifespan of between one and three years.

The NBU also took the decision to remove four coins (the 1, 2, 5 and 25 kopiikas) from circulation. Only the 10 and 50 kopiika coins would be produced as part of the new series. The smallest-denomination coin in the old series, 1 kopiika, was worth $0.00036. The NBU also introduced rounding rules whereby rounding was not applied to individual items, only to a bill’s total, with tax calculated to the penny and added to the price. 



Because of the changing value of the hryvnia over time, the NBU also introduced a new high-denomination banknote – the 1,000 hryvnia ($36.03) – alongside the existing 20, 50, 100, 200 and 500 hryvnia banknotes. The higher-denomination banknotes have much longer lifespans, of eight or more years, as they are used less frequently by members of the public. 

On September 30, 2020, the NBU announced banknotes and coins designed before 2003 would cease to be legal tender – although the public may still exchange old series currency, which accounts for 1.8% of the total number of banknotes currently in use (about 50 million), for three years. 

State of the art

NBU printworks and mint
Photo: NBU/Flickr

To differentiate its latest coin series, the new denominations have a different weight, size, thickness and edge treatment to those already in circulation. Nickel-plated zinc was also used for the 5 and 10 hryvnia coins, which gives them a distinct electromagnetic signal that can assist with identification. 

For its new banknote series, the NBU chose a two-ply, formaldehyde-free, paper substrate, which it believes is more environmentally friendly. Instead of using polymer, which is proven to increase the durability of banknotes, denominations that are used more frequently by consumers have been reinforced with ‘flax fibres’. 

The two-layered substrate has allowed the central bank to integrate state-of-the-art security features into the design, without being limited to those specifically for paper substrates. The banknotes have been given a new design feature: all denominations have an embedded magnetic thread of 1.5mm. The 100, 200, 500 and 1,000 hryvnia banknotes will also be fitted with a 4mm window thread, while the 1,000 note has a 6mm window thread.

Alongside new optical elements, the central bank introduced new artwork synonymous with Ukraine. However, the colour and size of the banknotes, and portraits on the obverse, remained the same to help the public identify denominations. The NBU also tested the new security features in a ‘live environment’ by issuing commemorative banknotes. 

Upgraded facilities

Ukraine’s banknotes have been printed by the NBU’s printworks since the 1990s, and the move to a different substrate required the central bank to renew both its printworks and papermill in time for the redesign. 

“We already produced banknotes for other countries, so there was never a discussion as to whether to outsource the printing,” says Volodymyr Bahlai, director-general of the Banknote Printing and Minting Works. 

“We just needed to renovate the facilities we had, and bring the production cycle to the highest current international standards.”

Reducing the number of denominations in circulation, Bahlai says, would save the NBU more than $35 million over the next 20 years. According to the NBU, the state would save 90 million hryvnia a year by reducing the cost of production and processing of low-denomination coins, and a further 1 billion hryvnia over the next 20 years through the replacement of banknotes with coins. 

The benefits are also evident in fraud data. Before the introduction of the new notes, the number of counterfeits per million authentic banknotes was three units in 2014, versus 0.2 units for 2020. 

The forward-looking initiatives set in place several years ago are now paying off for Ukraine. 

The Central Banking Awards were written by Christopher Jeffery, Daniel Hinge, Dan Hardie, Rachael King, Victor Mendez-Barreira, William Towning and Alice Shen

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