Today's moves prove such fears were justified. Perhaps when long awaited IMF funds arrive in the coming weeks to replenish Ukraine's foreign reserves, the National Bank will come to its senses and cancel the useless capital restrictions. In the meantime, they will contribute to the bank's further loss of control over the foreign exchange market.
The Ukrainian hryvnia is by far the worst performer, having lost another 11 percent of its dollar value today. In response, the Ukrainian National Bank strengthened its capital controls, banning banks from issuing hryvnia loans with the purpose of buying foreign currency and warning importers that any prepayments of more than $50,000 will be scrutinized.
Ukraine's devaluation has more varied causes than those in other post-Soviet countries. Russia has taken out Ukraine's biggest foreign currency sources, annexing its tourist mecca, Crimea, and unleashing a war in the eastern industrial regions where most of the country's metals production is concentrated. In November 2014, the last month for which International Monetary Fund data are available, Ukraine's exports stood at a little less than $4 billion, compared with $5.6 billion the year before. Meanwhile, the National Bank of Ukraine has proven remarkably inept. Its attempts to control the exchange rate amid dwindling reserves resulted in a rampant black market. When the central bank began floating the currency, at the recommendation of the IMF, it began recording its greatest losses in reserves -- a reflection of pent-up demand for foreign exchange and anxieties about clueless regulatory efforts to come.