KIEV, Jan. 9 – Prime Minister Yulia Tymoshenko’s government on Wednesday launched a massive campaign to return billions of hryvnias in failed Soviet-era bank deposits, a plan that some analysts fear may exacerbate Ukraine’s high inflation.

The money is to be returned within several days.

The populist plan was one of Tymoshenko’s key campaign issues at the Sept. 30 snap election that had catapulted her to the post of prime minister. Millions of people are expected to apply for the compensation of the deposits.

Tymoshenko, appearing on ICTV television in prime time, called on the people to show calm and to avoid huge lines that are now expected to be formed in savings bank offices throughout the country.

“I ask you, my dear, especially senior people, not to get worried and not to stand in the huge lines,” Tymoshenko said. “The re-registration of the deposits and withdrawal of the deposits has no time limitations.”

The payments come at a sensitive time as Ukraine’s consumer inflation rose to 16.6% in 2007, the highest level in the past seven years. The fear of accelerating inflation forced the National Bank of Ukraine to hike its key short-term interest rate to 10% from 8% beginning early January.

Oshchadbank, the state-owned savings bank, is thought to owe about 132 billion hryvnias ($26 billion) to millions of people since the early 1990s, when the deposits lost value due to hyperinflation.

In her campaign message, Tymoshenko pledged to pay the debts completely within two years, a plan that Oleksandr Morozov, a former chairman of Oshchadbank, said could provoke inflation at 40% in 2008.

Tymoshenko later explained the total amount of the debt to be paid out might be only half of what had been previously thought, and said the payments will be moderate this year to avoid the inflation pressure.

The government envisaged UAH20 billion for the debt payout in 2008, of which UAH6 billion will be made in cash, while the rest of the payment will be used to pay household bills, such as power and gas supplies.

The UAH6 billion in cash will go towards clearing only UAH1,000 by each depositor, and the government plans to encourage the people to leave the money on the account by offering high interest rates: 9.5% for US dollars and 13.5% for hryvnias.

“The task is to organize the payments in a way that would prevent acceleration of inflation and would make sure the returned money does not depreciate on the way to stores,” Tymoshenko said.

In order to claim the money, the people would have to re-register, including producing their old Oshchadbank statements, passports and a tax ID numbers, and the money will be disbursed within the next three days. (tl/ez)