Historical Sketch

During the Great Nordic War of the early 18th, the Baltic came under Russian rule. In the First World War, Germany occupied the territory, which triggered the break away and subsequent independence of Estonia, Latvia, and Lithuania in 1918. It lasted only up to World War II. In 1940, the three Baltic states were occupied and annexed by the USSR and in the following year by Germany, together with the entire western part of the Soviet Union, which incorporated them into the "Reichskommissariat Ostland" (Eastern Land). In 1944 finally, the Red Army drove out the Germans, and Estonia, Latvia, and Lithuania became Soviet republics within the USSR again. During the decay of the Soviet Union in 1990, Latvia began to build state structures, , and after a referendum in March 1991, the restoration of the independent Republic of Latvia was declared.

Monetary History Overview

During First World War occupation of Russian territories in Poland and the Baltic States, the German military authorities for the "Territory of the Supreme Commander for the East" (Gebiet des Oberbefehlshabers Ost) mandated the Credit Bank for the East (Darlehnskasse Ost) in Poznan, Poland, with the issuance of banknotes in German Reichsmark. The usage of the so-called "East Mark" (Ost-Mark) was restricted to the occupied territories, and the notes were not convertible. Banknotes were also issued in Ruble denominations at half a Reichsmark, referred to as "East Ruble" (Ost-Rubel).

In 1918, Latvia declared independence from Russia. In April, the government decided the immediate separation from the inflationary Russian currency area. The 1st Latvian Ruble was created as transitional currency. It replaced the Ost-Rubel at par, and the paper money from the occupation period remained in circulation. The Ruble was pegged to the German Reichsmark and followed its inflationary development. In November 1922, the Bank of Latvia began operations, and the 1st Latvian Lat replaced the Ruble as national currency. It was pegged to gold at the former French standard. In 1936, the Lat got devalued by 17% and repegged to the Pound Sterling, where it remained stable until the Soviet annexation of the Baltic states in 1940. The Soviet Ruble was introduced more or less at par with the Lat, and the Latvian currency got abolished in March 1941.

In 1991, Latvia attained (second) independence. In May 1992, the 2nd Latvian Ruble was introduced as a transitional currency, which allowed to stop the inflow of Russian and Soviet currencies. The Ruble lost about 30% of its value during the twelve months of its existence, and June 1993, the transitional currency was replaced. Two zeros were cut, and the 2nd Latvian Lat became the new currency unit, initially under managed float, narrowly stabilized against the US Dollar. In 2005, the Lat got repegged to the Euro, and in 2014 finally, Latvia joined the European Monetary Union and introduced the European Euro. The Latvian banknotes and coins were withdrawn in within two weeks.

Latvia joined the International Monetary Fund (IMF) on 19.05.1992.

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