Ukraine's political and financial elite hurled insults and ultimatums at each other on Friday over the hryvnia currency's recent fall to historic lows.
But central bank measures — including a big rise of 4-5 percent on overnight refinancing rates — helped strengthen the hryvnia slightly to 8.1-8.5 to the dollar from about 9/$ on Thursday, when the currency touched 10/$ at one point.
The central bank hit back at the government, accusing it of pursuing "inept" policies that were driving Ukrainians towards default, a day after Prime Minister Yulia Tymoshenko called for the dismissal of its chairman.
"The government's inept policies in running the economy have led to a situation in December in which the country could find itself in internal default," the bank said in a statement.
"The government now has no funds to pay salaries, pensions and social benefits or to cover its domestic and external obligations."
Hours later, President Viktor Yushchenko told the central bank to secure "total control" over banks' purchases of dollars and issued a deadline for it to stabilise the currency market. "I give you 10 days to stabilise the hryvnia rate. There are no economic reasons for not having a stable rate. In 10 days' time we should organise the market in such a way that maximises dollar supply," Yushchenko said at a meeting with central bank and commercial bank officials.
The president has said he would take "tough" staffing decisions after the central bank and the government submit reports about their activities to parliament.
CENTRAL BANK CRITICISED
He can sack Central Bank Chairman Volodymyr Stelmakh, subject to approval by parliament, although his chief of staff said Yushchenko would not be pressured into such a decision.
The political elite have spent the past year bickering and Tymoshenko and Yushchenko have traded increasingly personal insults since September when a coalition of their parties in parliament fell apart.
Although it has since been reinstated, there are few signs that the two have resolved their differences a year before a presidential election. Analysts say politicians may now be tempted to blame economic turmoil on the central bank.
The central bank has begun imposing what some analysts have called capital controls.
It has raised the overnight refinancing rate to 22 percent from 18 percent on secured deposits and to 25 percent from 20 percent on unsecured deposits and has promised to cut down on refinancing banks.
It has in the past week limited sales of its dollars only to importers and clients needing to service their foreign debt in December. Deputy Chairman Anatoly Shapovalov said the bank sold $180 million on Thursday and would intervene next week.
But dealers, frustrated for weeks with the central bank's lack of clear communication, complex intervention procedures and limits on dollar sales, said the hryvnia could have risen higher had the bank not unexpectedly offered to buy dollars.
"Until the central bank announced (a buy rate of) 8.65 hryvnias, the rates were 8.1/8.2-8.4," one dealer said.
"The central bank didn't allow for the hryvnia to rise as strongly at it could have. We could have finished the day at 8/$…The actions of the central bank are such that there are simply no words for criticism."
