MOLDPRES News Agency – November 29, 1993. The national currency is introduced in the Republic of Moldova – the Moldovan leu
09:18 | 28.11.2021
Category: REPUBLIC OF MOLDOVA: THREE DECADES OF INDEPENDENCE.
Retrospective of events
Due to the history of the Moldovan voivodship state, various currencies circulated in these lands, most often foreign. Duchies, florins, zlotys and other coins were made of gold and silver. They did not replace natural trade, which was dominant in trade, but facilitated transactions where natural trade was impossible. At the beginning of the 17th century, the Dutch coin “leeuwendaalder”, which was the face of a lion, also appeared in the Romanian Principalities. The name “lion” should cease in Wallachia and Moldova. Later, the name “lion” was assigned to other values. Money also penetrated from the western Balkans, which extended further into Oltenia.
The union of the principality imperatively required the creation of unique national values. The nationalization of the notions of “lion” and “money” in the collective mentality imposed their acceptance as an official name. Thus, in 1867, after the Union of the Romanian Principalities, the national currency of Romania was named “Leo”.
Bessarabia was incorporated into the Russian Empire in 1812 and the tsarist authority imposed the Russian ruble. The most interesting moment was during the Second World War, when three coins were circulating in Bessarabia in parallel: the Romanian leu, the German mark and the Soviet ruble. With the reincorporation of Bessarabia into the USSR, and after the return to the MSSR, the only currency had become the Soviet ruble.
After decades of stability based on the chronic shortage of consumer goods, the ruble began to devalue in the late 80s of last century. The deepening crisis of the Soviet economy and the unbalanced monetary and financial policy of the USSR government have generated rampant inflation. The Soviet republics, even before the proclamation of its independence, at the beginning of the preparation for the introduction of national values. Unfortunately, it was irrational in Moldova. Massive food, beverages and rubles are being exported against the rapidly devaluing rubles. The Baltic countries did the opposite: they bought metals, fuel, equipment, food and drink and got rid of the Soviet ruble.
The first democratically elected parliament, being aware that the Republic of Moldova remains ahead of other post-Soviet countries in preparing for the transition to the national currency and leading to the explicit provision of the Declaration of Independence on this issue, meets on the 22nd. and 23 January 1992 for debate. Discussions were heated, but consensus was reached on most issues. Finally, his situation was tense on the subject of naming national values. Democrats referred to the tradition and history of national value and proposed the lion. The conservative side was against, considering that we are borrowing something Romanian again. Agrarians were inspired by the speech in parliament of the great economist and former adviser to two American presidents, Angel Rugina. His Majesty suggested that the name of duchy, which circulated in the Romanian principalities 200 years ago, would be opportune. In the end, the experts managed to convince the majority that the “Moldovan” option is the most successful and thus the national currency received the vote of confidence of the legislature. On 22 January 1992, Parliament adopted the Law “On the circulation of money”.
The slow pace of preparation for the introduction of national value forced President Mircea Snegur to issue a decree on December 9, 1992 on the formation of the Monetary Reform Committee in the following composition: Andrei Sangheli, Prime Minister, Leonid Talmaci, BMN Governor, Mihai Patraș . , Chairman of the Parliamentary Committee on Finance and Budget, Sergiu Certan, Minister of Economy, Valeriu Chițan, Minister of Finance. This Committee accelerated things and soon proceeded to draw up the banknote and coin charts.
The painter and graphic artist Gheorghe Vrabie, author of the State Coat of Arms, was chosen to elaborate the project of the image of the national currency. Here is how Vrabie himself describes, in an interview given to the newspaper “Jurnal de Chișinău”, this extremely responsible work and very hidden from the eyes of the world:
“I went on a business trip to Bucharest, to the National Bank of Romania. They told me not to tell anyone where I was going, not even my wife. My workshop is located inside the Printing House of the National Bank of Romania, in a former warehouse. The room was about 10 square meters, no more. A computer operator also worked there. Day and night I was supervised by a Moldovan security officer. The man accompanied me everywhere … The whole work on banknotes and coins took me about three months. Initially, I elaborated and printed the banknotes with a face value of 1000, 500, 200 and 100 lei. In a short time, I proceeded to elaborate the design of the banknotes with a face value of 1, 5, 20 and 50 lei ”.
The lower value banknotes were kept at the National Bank of Moldova, and the 500 and 1000 lei banknotes were kept by the Ministry of National Security.
On November 24, 1993, President Mircea Snegur issued the decree “On the introduction of the national currency in the Republic of Moldova”. The decree specified that “starting with November 29, the national currency – the Moldovan leu, equal to 100 bani, will be introduced in the Republic of Moldova. The exchange of all funds in number and from accounts, in circulation on the territory of the Republic of Moldova, including population deposits, will be carried out until December 2, 1993, at 18.00 at the exchange rate 1 leu against 1000 coupons. Starting with 18.00, December 2, 1993, the leu is considered as the only legal means of payment on the territory of the Republic of Moldova ”.
Right from the beginning of the Moldovan leu adventure, the National Bank of Moldova has promoted a very restrictive monetary policy. Refinancing rates for commercial banks had reached almost unusual levels (377% in March 1994). In the first stage, the minimum required reserves for commercial banks were relatively high, about 28%. However, at the suggestion of international experts, the level of the refinancing rate was relaxed and the level of minimum required reserves was reduced from 12% at the end of 1995 to 8% at the end of 1996. These well-thought-out actions in implementing the reforms made . for Moldova to obtain favorable international supply quotations (Moody’s) in the 1990s.
The national currency had two significant depreciations. The first occurred in 1998, when the Russian currency depreciated overnight by more than 200%. The influence of the fall of the Russian ruble on the leu was direct, because within the Commonwealth of Independent States payments were made in rubles. A latent but steady depreciation began in 2014. Then the banking system was heavily plundered by two major criminal combinations – Landromat and the theft of the billion. The effects of this information are still being felt.
Remittances have an important contribution to maintaining relative macro-financial stability. About 1.3-1.4 billion US dollars are transferred annually by the diaspora to Moldova. But corruption at the highest level has significantly diminished the positive impact of annual remittance growth.
The lion in its almost three decades of existence has followed the trajectory of economic and political evolution in the country. A national currency cannot be stable where political instability persists and corruption flourishes. The Moldovan leu can become truly strong only in the conditions of a coherent political course, which will have general conditions for an economy in permanent development and free from voluntarism and corruption. However, 28 years after its introduction in the circuit, the Moldovan leu has shown that it can be the backbone of a sustainable economy in a state in full swing on the most important levels.
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