Celebrating 144 Years of the Bulgarian Lev: A Journey Through Monetary History

Business » FINANCE | June 21, 2024, Friday // 10:30
Bulgaria: Celebrating 144 Years of the Bulgarian Lev: A Journey Through Monetary History

Bulgaria celebrates 144 years since the creation of the Bulgarian lev. June and July are significant months in the country's monetary and financial history, marking the inception of several key institutions still influential today.

On June 4, 1880, the Bulgarian lev was established with the publication of the "Law on the right to mint coins in the Principality of Bulgaria." Shortly before, on June 6, 1879, the Bulgarian National Bank (BNB) conducted its first banking operation, managing a state transfer of 8,687,043 francs. Two million francs were used to raise the BNB's basic capital, with the remainder deposited.

In a more recent milestone, on July 1, 1997, Bulgaria introduced a currency board, stabilizing the country's finances and overcoming hyperinflation. Additionally, the Ministry of Finance, which manages the state treasury and budget, was founded on July 5, 1879.

The history of Bulgarian money and finance is marked by complexities and significant challenges. Understanding this history can provide valuable lessons for savers and investors. Before the First Balkan War, Bulgaria operated under the classical gold standard. The monetary circulation included about BGN 164 million, comprising gold, silver, copper, and nickel coins, as well as banknotes. The gold lev was the cornerstone of the monetary system, and citizens could exchange banknotes for gold at the Bulgarian National Bank (BNB).

This system remained in place until Bulgaria's involvement in the First World War. The financial burden of consecutive wars led the state to print new banknotes, resulting in severe inflation. The value of paper money depreciated against the gold lev by up to 16 times. From the end of 1918, the exchange of banknotes for gold or silver was suspended indefinitely, and by 1920, the gold coverage of banknotes had dwindled to just 1.56%.

Max Baklayan, CEO of Tavex, offers an insightful definition of money, stating, "Gold is money, and what we keep in our pocket and call 'money' is actually currency. The difference between money and currency is that money has value in itself, and currency does not."

Gold remains a reliable safeguard against the depreciation of paper money. The global abandonment of the gold standard stemmed from the allure of inflation, a temptation that no government is immune to.

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Tags: Bulgarian, lev, gold

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