I just spent some time in Ukraine and I thought it would be beneficial to discuss what is happening to the Ukrainian currency, the hryvnia, for this is what a full-blown currency crisis looks like.  Late last week, the hryvnia has hit 34 to the USD; although, it has since recovered somewhat to the high twenties.Only a few months ago, it was in the high single digits.

The currency is collapsing because of a basic lack of confidence in the government to effectively manage the situation.Obviously Ukraine is suffering from a destabilizing war in the East and the loss of much of its industrial capacity in the Donbass region to the separatists.  Ukraine has burned through most of its foreign currency reserves and is rumored to have less than $10 billion remaining which will only last for a very short period of time.

The Ukrainian central bank initially spent precious reserves to defend the currency but recently let the hryvnia free fall as they had to conserve funds for other purposes.Now there is no plan to effectively deal with the situation as is. The only option is to pray the EU and the IMF will deliver more money, about $15 billion at least. And that will only keep Ukraine afloat for a while.

Herein lies the rub.Ukraine really doesn’t want to push through economic and structural reforms demanded by its lenders. This is how we got into this problem in the first place. Ukraine was promised $15 billion by the IMF several years ago but the program was halted due to lack of progress on these reforms. This pushed Ukraine into the arms of the Kremlin for money and the rest is history.

Euronews reported recently on comments by IMF Chief Christine LaGarde, Lagarde said: “The Ukrainian authorities are demonstrating a determination and a courage to reform like we have never seen. They have, for instance, not only reached their targeted deficit for this year but they have exceeded the objective.” In return for the help, Ukraine has agreed to quickly cut spending, put up energy prices, restructure the banks, reform state-owned firms and crackdown on corruption.

These reforms will bring even more hardship on the Ukrainian people who have spent the last year dealing with a war, two revolutions, and extreme financial hardship.  Now their energy prices are going to rise and many will lose their government jobs.  Imports have already dried up as the cost to bring something into Ukraine in a foreign currency is simply overwhelming expensive now. For this reason, the government has drug its feet on pushing the reforms through until the last minute. It also doesn’t help that the country’s economic system is rife with corruption and those siphoning off billions don’t want the gravy train to end.

But the end is near for Ukraine if they do not implement these measures.They will run out of money, the country will default on its debts, there most likely will be another revolution, and a possible pro-Moscow government will come into power.

Perhaps Russian President Putin will get what he wants after all.

L.Todd Wood is a former emerging market debt trader with 18 years of Wall Street and international experience. He is also an author of historical fiction thriller novels. His first of several books, Currency, deals with the consequences of overwhelming sovereign debt.  He is a contributor to Fox Business,  Newsmax TV, and others.  LToddWood.com