Historical Sketch

The first Bulgarian state emerged in the 7th century, when Slavic tribes asserted their independence from the Byzantine Empire. In the 14th century, the Ottoman Turks conquered the land and kept it until the Russian-Turkish War of 1877. The following peace treaty created the Principality of Bulgaria under nominal Ottoman suzerainty. Additional territories were gained and lost in subsequent wars on the Balkans until 1912. In 1908 already, the Kingdom of Bulgaria had been proclaimed when the nominal Ottoman suzerainty had ceased. During World War II, Bulgaria allied with the Axis powers, and it was occupied by the Red Army in 1944. The Communist party took power and proclaimed the People's Republic in 1946, the monarchy had been abolished by plebiscite. In November 1989, the Communists lost their power monopole, and the Republic of Bulgaria got constituted a year later.

Monetary History Overview

When Bulgaria attained independence from the Ottoman Empire, the money in circulation was mainly Turkish, but also Russian and Austrian gold was used. Two years after independence a currency law was passed that created the 1st Bulgarian Lev as national currency in the French bimetallic standard. The state did not have the means to issue gold coins for the time being. In 1885, the Bulgarian National Bank began operations and issued paper money. During the 1890s, Bulgaria tried to switch to the gold standard and even issued the first gold coins in 1894. But in 1899, the attempt was abandoned and the convertibility of the banknotes had to suspended. In 1906, after a loan from the French government, gold convertibility could be restored, but only to be abandoned again in 1912. World War I and a subsequent economical crisis in the 1920s prevented any stabilization of the Lev. In December 1928, a thorough currency reform could be carried out, and the Lev was placed on the gold standard again, at a 96% lower level than in 1880. In October 1931, the gold standard was abandoned for good, but the Lev got pegged to the US Dollar and the French Franc which had remained on gold and thereby remained stable. During the coalition with Germany during World War II, the Lev got linked to the Reichsmark without actual peg. When the Red Army occupied Bulgaria in late 1944, the currency quickly lost about 75% of its pre-war value. The first sanitation step was carried out in March 1947 to eliminate the wartime cash surplus. The higher-denomination banknotes were withdrawn and only a small part was replaced in cash, the rest got transferred to blocked accounts and gradually released with a heavy tax deduction. In May 1952, a currency redenomination was carried out and two zeros were cut, creating the 2nd Bulgarian Lev a the new unit. Prices, wages, and bank deposits below a threshold were converted at more favourable rates. As part of the reform, the Lev got pegged to the Soviet Ruble with an almost 60% devaluation. In 1957, a preferential "Capitalistic Tourist" rate was created beside the official rate. The was the initiation of a system of parallel non-commercial and commercial exchange rates that remained until the end of the Communist era. In 1962, Bulgaria followed the Soviet currency reform of the preceding year and introduced the 3rd Bulgarian Lev, the "heavy" Lev with one zero removed. Otherwise, no change occurred in the monetary policy until the end of communist rule, the Lev was frozen on an artificially high exchange rate, while transactions were done using a multitude of parallel rates. In 1990, the rates were gradually adjusted to the real economic value, and no longer called "capitalistic", until in February 1991, the Lev was floated at a value of about 3% of the former official rate. The downfall of the currency was finally stopped in 1997, when another 98% of the valued had gone. In July of the year, the Lev got pegged to the German Mark, later the Euro. The stabilization was successful such that two years later, another redenomination could be carried out in July 1999, eliminating three zeros, and the 4th Bulgarian Lev became the new currency unit. The peg to the Euro has remained unchanged since then.

Bulgaria joined the International Monetary Fund (IMF) on 25.09.1990.

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