Historical Sketch

Since antiquity the Albanian territories were subjugated to its neighbours, the Ottomans arrived in the early 15th century and needed many decades to assert their rule. After a series of uprisings, Albania declared independence in 1912 during the Second Balkan War, but international recognition came only a year later on the London conference. A principality was established with a ruling prince from Germany who was in the country only for half a year, then driven out by the onset of World War I. Again, Albania got partitioned by its neighbours and was re-established only in 1920. The nominal principality (with a vacant throne) became a republic in 1925, but just three years later the president declared himself king. In 1939, Albania got occupied by Italy but kept statehood as a protectorate under the king of Italy in personal union. In 1943, Italy left the coalition of the Axis powers, and Germany took over Albania. At the same time, the communist insurgence against the occupation increased. After the Second World War, a communist government was established that gradually isolated the country from the rest of the World. In 1990, the peaceful transition to multi-party democracy started a period of instability that culminated in a short civil war and international intervention at the end of the decade.

Monetary History Overview

During the first decade of independence, the Albanian monetary situation remained unregulated. Payment transactions were conducted in Turkish, Austrian, and Italian currencies. Through Italian influence, the gold Franc of the Latin Monetary Union had become the common unit of account. Due to the weakness of the institutions, it took more than a decade after the declaration of independence until Albania could remedy its monetary affairs. The republican government of 1925 with Italian support, established a central bank, domiciled in Rome, and the 1st Albanian (Gold) Franc was created as national currency. Coins were issued in the auxiliary unit "Lek", as well, at a fifth of the Franc. During the de facto Italian annexation of World War II, the Albanian currency remained in circulation but got pegged to the Italian Lira. The brief German rule at the end of the war did not change anything in the currency situation. The provisional government ordered the withdrawal of all circulating currencies in 1945 when they had taken power after liberation. The pre-war Albanian banknotes were to be counter-stamped, for higher amounts the proprietor had to bring evidence for their origin. In July 1946, the currency was reformed in two steps after the model of neighbouring Yugoslavia. The exchange operation was primarily a means to confiscate excessive cash holdings of the population. The first step saw the creation of the 2nd Albanian Franc, together with a massive withdrawal of cash to blocked accounts. One year later, in July 1947, followed the second step of the currency reform, and the 1st Albanian Lek became the new national currency, this time the currency exchange went without confiscation. Both currencies of 1946 and 1947 were pegged to the Yugoslav Dinar, but the political dissent of 1948 which led to the break-up between Albania and its neighbour caused a re-peg to the Soviet Ruble in 1948. The banknotes were exchanged in October 1949 once again, and as in 1947 the full amounts presented were converted into new notes. The 1961 currency reform ("heavy" Ruble) in the Soviet Union was echoed by the Albanian currency reform of 1965. One zero was cut creating the ("heavy") 2nd Albanian Lek, otherwise the monetary policies remained unchanged. The end of the communist rule in 1990 also brought a stepwise transition to currency convertibility. In September 1991, the Lek re-pegged from the Soviet Ruble to the European Currency Unit (ECU). In the following year, the Lek was devalued by more than 80%, and the exchange rate got floated in August 1992. The Albanian currency lost about 50% of its value during the political-economic crisis of 1997 but was able to recover most of the loss until the mid-2000s. The Lek has remained stable since then.

Albania joined the International Monetary Fund (IMF) on 15.11.1991.

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