The period from 1990 to 1997 is probably the only time of relative independence of the Bulgarian lev. Some people may have good memories of that time, but in socio-economic terms, these years were problematic and very difficult. This was stated in the program "Revision" on NOVA NEWS by the only professor of economic history in Bulgaria - Prof. Pencho Penchev. In the program, he presented the history of the Bulgarian lev and the money in Bulgarian lands - from the time of the Ottoman Empire to the present day.
In the months before the adoption of the euro in Bulgaria as an official payment unit, the voices that claim that in this way our country is losing sovereignty and independence are becoming increasingly vocal. According to Professor Penchev, however, "currency independence" is an illogical construct.
"From an economic point of view, the claim of an independent currency makes no sense. The economic logic is that we are dependent - on the one who sells milk, because we want milk, the student is dependent on me, because I will experience it, you on the spectators, because they have to watch you. This is how we become better at what we do, we offer a better product or service and we become richer. "Currently, this topic is viewed emotionally," he said.
During the Ottoman Empire, Bulgarians used all kinds of currencies that were widespread in the Sultan's possessions - Turkish liras, all kinds of European coins, Russian rubles, American dollars, and even Indian rupees.
The change came with the establishment of the Bulgarian National Bank - in 1879.
"The Bulgarian National Bank was established as a commercial bank, a state commercial bank. Its capital was 2 million French francs. The accounting unit of the Bulgarian National Bank at that time was the French franc", commented Prof. Penchev. According to him, in those years, in theory, you could also make a deposit at the central bank. “However, economic life was so limited that the bank refused to accept deposits because there were not enough applicants for loans to operate as a real bank”, he said.
The Bulgarian lev was born on May 21, 1880, when Prime Minister Petko Karavelov submitted the project for minting coins - lev. In the first years, only small coins were minted, later the printing of and banknotes began. However, it turns out that Bulgarians have no sentiment towards their new currency.
"Bulgarians have no sentiment towards their new lev currency. Bulgarians have used small money, large banknotes or gold coins are hidden, small coins are used. They have no sentiment whatsoever. Some Bulgarians have not even realized for years that Bulgarian coins have been minted”, pointed out Prof. Penchev.
What happens to the Bulgarian lev with the advent of the communist regime? The answer:
"Bulgarians react with a spontaneous rationality to this coup - money disappears. Even the available banknotes simply disappear, treasury bills disappear too.” According to Prof. Penchev, the reason is that people realize that the political party behind the coup is communist, and it declares itself against private property, they know what happened in the USSR. People had some spontaneous rationality. They prefer to invest their money in something.
„Even before the coup, during the war, the prices of everything began to rise, especially real estate. A medium-sized apartment in 1939 was 160,000 leva, and in 1941 - 500,000 leva. Why? People are running away from money, they are afraid of inflation, and that is why they are buying the safest thing - property. Gold is also disappearing, it can only be found at a very high price,”, he pointed out.
"From politicians to ordinary people they would be endlessly amazed. They would also be amazed by what money is today. The whole drama, the whole artificial tension would amaze them endlessly - from Petko Karavelov, through the leva launch committee, through the deputies to the people. Everyone would be amazed."
► The currency board in Bulgaria is probably writing its epitaph in the history of Bulgarian finances, since it is almost certain that from January 1st of next year, our country will become the 21st member of the eurozone and we will switch from the lev to the euro. Essentially, the currency board, or as its academic name is - Currency Board, is a form of monetary policy in which the local currency is tied with an official and non-floating exchange rate to the value of another currency. We will probably surprise you, but the first currency board in the world was built a long time ago - in 1849 on the island of Mauritius, which was then a British colony and which adopted the British pound as its anchor. It is the colonies that usually and historically accept governance through a currency board in order to be close - in one form or another - to their feudal lord. Even today, a large part of the countries that still use a currency board are former colonies. According to the IMF, besides us, there are 28 other countries in the world that are in a currency board regime - more of them in Africa - Benin, Gabon, Congo, Niger, Togo. Of course, this does not mean that the currency board is a colonial instrument. Besides us, in Europe there were two more countries that had already adopted the euro, but they adopted it from a board - these are Estonia and Lithuania. Both are now part of the eurozone and both did not experience any shocks during the transition to the common currency, on the contrary - today they are richer.
► The currency board is a widespread mechanism for rescuing sinking currencies, and Argentina is the country in which it has operated the longest - for 71 years in one form or another, it had a currency board regime. As for Bulgaria, the Currency Board was officially constructed on July 1, 1997. The reason is clear to everyone - the government of Zhan Videnov has brought Bulgaria to hyperinflation, we have experienced a bank collapse, the salary has reached two dollars, and one dollar is equal to 3,000 leva. The value of the Bulgarian lev has simply been lost. The country cannot borrow from international markets because no one trusts us, and we cannot pay our debts. And we are leaning on the International Monetary Fund. It will give us money, but only on one condition - the introduction of a Currency Board. Thus, the Bulgarian lev is pegged to the German mark with the knowledge that only a few years later the mark will become the euro. Even then, it was completely clear to everyone that the big goal is for Bulgaria to end its currency board by entering the single European currency. What are the foundations of the currency board? First of all, it is an anchor that keeps the exchange rate fixed, and the central bank is obliged to exchange each lev for a mark, and then for a euro, upon request. To do this, it must maintain a foreign exchange reserve of the respective currency. In a currency board system, the central bank does not have the right to lend to the government, does not have the right to conduct monetary policy and is obliged to invest the accumulations in the board's reserve.
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► That is why the currency board is a system of stability, because each lev is covered by a stable currency - in our case, the euro. Each lev is simply a receipt for the euro, its avatar. What are the results of the board? Undisputed. If the accumulated inflation from 1990 to 1997 was as much as 210%, in the first years of the board it shrank to below 6 percent. Before the board, our economy, instead of growing, actually shrank and recorded a decline of 5 percent. After that, the Gross Domestic Product began to grow - to over 4 percent. Our national debt before the board was a fantastic 168%, and in the years since, it has been reduced to 75%, so that today we have reached levels below 30% of GDP. It is precisely because of these results that Bulgarians today have almost fanatical faith in it. Finally, we want to tell you who we should thank for it. Although the American professor from the "Johns Hopkins" University Steve Hanke is often cited as the father of our currency board, it actually has many fathers and they are Bulgarians: Stefan Sofianski, Ivan Kostov, Svetoslav Gavriyski, Dimitar Kostov, Muravey Radev, Dimitar Radev - the current governor of the BNB.