site.btaFebruary 19, 1999: Bulgaria Redenominates Its Currency, BGN 1 Replaces 1,000 Old Leva

On February 19, 1999, the Bulgarian Parliament passed an act on re-denomination of the national currency, the lev, resolving that 1,000 old leva will exchange for one new lev, effective July 5, 1999.

The decision followed a period of severe economic turmoil in the 1990s marked by hyperinflation and the collapse of public trust in the banking system. In 1996-1997, inflation had soared to several hundred percent, eroding the value of the lev and complicating daily transactions and accounting. To stabilize the economy, Bulgaria introduced a currency board in July 1997, pegging the lev to the German mark, which restored some confidence in the currency. However, the long period of inflated prices and large-denomination banknotes made everyday financial life cumbersome. Redenomination was therefore necessary to simplify accounting and payments, and signal the country’s commitment to broader economic reforms.

Here is how the event was reported in BTA's English-language service:

Parliament Passes Lev Redenomination Act

Sofia, January 19 (BTA) - The Bulgarian lev will be redenominated on July 5, 1999, with 1,000 old leva equal to 1 new lev, under a Lev Redenomination and Change of the Standard of Prices Bill which Parliament passed conclusively Friday.

The redenomination also applies to all property and pecuniary rights and obligations, including enterprise assets and liabilities, securities, the amount of participating interests, the amount of commercial corporations' capital entered in the Commercial Register, and all mediums of payment denominated in leva.

A motion by Ventsislav Dimitrov MP of the Alliance for National Salvation that the lev be redenominated on January 1, 2000 was defeated.

The prices of goods and services will be quoted in old and new leva until December 31, 1999.  Until the same date, the old and new lev banknotes and coins will remain in parallel circulation and will be legal tender up to any amount, the old ones counting at their proportionately reduced face value.

After the entry of the law into force, the old banknotes and coins will be exchangeable without a time limit and in unrestricted amounts when presented at central bank desks. All exchange rates will also be announced in new leva after the effective date of the  redenomination law.

Parliament determined that the new lev will exchange for the Deutsche mark at a fixed rate of 1 to 1.  The old lev was anchored to the DM at a 1,000:1 ratio.

Ventsislav Dimitrov insisted on a 1.25 lev/DM 1 exchange rate, arguing that this will encourage production and export, but his motion was killed.  Independent MP Nansen Behar moved that the lev be pegged to the euro, but was also voted down.

According to the Chairman of the National Assembly Economic Committee Nikola Nikolov, there is no economic mechanism that can stop the depreciation of the lev. "The crisis of competitiveness is overcome by production growth, and this is the target of the  structural reform," he said.

"A revision of the exchange rate would be tantamount to disaster for the country and automatic increase of the prices of petrol, central heating, electricity and gas," central bank Governor Svetoslav Gavriiski said.  AM/LG/13:32:42 19-02-1999 -0-