The invasion triggered immediate economic shocks, with the National Bank of Ukraine (NBU) taking swift action to stabilize the financial system. The NBU ensured that banks had adequate cashMoney in physical form such as banknotes and coins. More holdings to meet public demand, which surged as people sought to secure their savings in the face of uncertainty. The central bank also limited cash withdrawals to manage liquidityDescribes the extent to which assets or rights can be converted into cash without causing a significant decrease in the asset’s price. Accordingly, liquidity is often inversely proportional to the profitability of the asset and involves the trade-off between the selling price and the time needed to convert it to cash. In finance, cash is considered the most liquid asset and cash is sometimes used as a synonym for liquidity (e.g. cash reserves; cash pooling…). More and prevent a run on the banks, which could have further destabilized the economy. Since 2021, the Ukrainian Centre for Strategic Communications and Information Security has been advising citizens to store cash along with food, water and medicine in their emergency kits.
The conflict has displaced millions of people, both internally and externally, creating one of the largest humanitarian crises in recent history. Cash assistance has been a vital component of the humanitarian response, providing displaced individuals with the means to meet their basic needs. The United Nations High Commissioner for Refugees (UNHCR) and other humanitarian actors have emphasized the importance of cash programs in supporting the displaced population, with estimates suggesting that relief assistance could cost hundreds of millions of dollars per month2.
In March 2022, Poland implemented a programme to assist Ukrainian refugees by allowing them to convert their hryvnia savings into Polish zlotys at a fixed exchange rateThe rate at which one currency will be exchanged for another. More. This initiative was a collaboration between the National Bank of Poland (NBP) and the National Bank of Ukraine, aimed at providing financial relief to the millions of Ukrainians who sought refuge in Poland. In April, the European Council recommended that EU members states set up similar conversion schemes enabling refugees, including children to exchangeThe Eurosystem comprises the European Central Bank and the national central banks of those countries that have adopted the euro. More up to 10 000 hryvnias (approximately €310).
Despite the destruction of infrastructure and the disruption of supply chains, Ukraine has managed to keep its banking system operational. This has been crucial in ensuring that cash remains accessible to the population. The continued functioning of ATMs and bank branches, even in areas affected by the conflict, has been a testament to the resilience of Ukraine’s financial infrastructure. The ability to withdraw cash has provided a lifeline for many Ukrainians, enabling them to purchase essential goods and services.
The international community’s response to the invasion included sweeping economic sanctions against Russia, which have had ripple effects on Ukraine’s economy. While the sanctions aimed to isolate Russia economically, they also disrupted trade and financial flows, affecting Ukraine’s access to foreign currencyThe money used in a particular country at a particular time, like dollar, yen, euro, etc., consisting of banknotes and coins, that does not require endorsement as a medium of exchange. More and international markets. The NBU’s measures to manage cash flow and stabilize the hryvnia have been essential in mitigating the impacts of these disruptions and maintaining economic stability1.
The Russian invasion also triggered a significant increase in cash demand, not only within Ukraine but also in neighboring countries. This surge was driven by precautionary motives, as individuals and businesses sought to secure their assets in response to the geopolitical risks and economic uncertainties posed by the conflict. The proximity to the conflict zone led to heightened demand for cash, particularly in countries bordering Ukraine or Russia. Nations like Estonia, Lithuania, Slovakia, and Finland experienced extremely elevated demand for euro banknotes, with deviations from historical averages ranging from six to ten standard deviations. This increase was primarily observed in high-value denominations, which are often used for store-of-value purposes.
The war has had a devastating impact on Ukraine’s economy, with significant contractions in GDP and increases in unemployment. The destruction of infrastructure and the disruption of agricultural production have further exacerbated the economic challenges. In this context, cash has played a crucial role in supporting economic activity and facilitating transactions, particularly in areas where digital paymentA transfer of funds which discharges an obligation on the part of a payer vis-à-vis a payee. More systems may be less reliable or accessible.
International support, including financial aid and military assistance, has been instrumental in bolstering Ukraine’s economy and its ability to defend itself. Europe, the United States and other allies have provided billions of dollars in aid, which has helped to stabilize the economy and support critical sectors. These cash injections have been vital in preventing a complete economic collapse and supporting Ukraine’s ongoing resistance efforts5.
Cash has played a pivotal role in Ukraine’s response to the Russian invasion, providing a means of economic stability and support for the population. The NBU’s measures to ensure cash availability, the importance of cash assistance in humanitarian efforts, and the resilience of the banking system have all been crucial factors in mitigating the impacts of the conflict. As Ukraine continues to navigate the challenges posed by the invasion, the role of cash will remain essential in supporting the country’s economic recovery and the