30th anniversary of the litas. Currency issue

This year marks thirty years since the litas began to circulate again in Lithuania after a more than 50-year break. This happened on 25 June 1993. We had the litas for a significant part of our history until the introduction of the euro in Lithuania in 2015. During this period, Lithuania changed and modernised, and the litas became an important symbol of the change of independent Lithuania. In this series of articles dedicated to the 30th anniversary of the litas, we will discuss the most important stages of the development of the litas, its issuance, and remember the most important elements of the design of litas banknotes and coins. Today we will tell you about the period when the litas appeared in circulation. 

By resolution of the Seimas of the Republic of Lithuania of 10 March 1993, Romualdas Visokavičius was appointed Chair of the Board of the Bank of Lithuania. He became Chair of the Board at a time when the exchange rate of the former temporary currency talonas depreciated rapidly (since 1992), so inflation had to be quickly curbed. 

One important decision had been taken already on 6 April. The minimum reserve ratio of commercial banks held at the central bank was increased from 10% to 12%, and the banks had to accumulate them in talonas rather than in foreign currency. All banks began to sell the currency actively, and the US dollar exchange rate began to drop. At the beginning of May 1993, the talonas began to depreciate, reaching 560 talonas for $1. In the three days between 15 and 18 May, the US dollar dropped to 100 talonas. At the end of June, 1 dollar was sold for 440 talonas. The exchange rate of the temporary currency talonas vis-à-vis the foreign currency had been relatively stabilised, although there were several contradictions. 

On 6 April 1993, the Law of the Republic of Lithuania amending the Law of the Republic of Lithuania on the issuance of money in preparation for the introduction of the litas was adopted in such a way that the articles of the Law corresponded to the changed reality. Regular meetings were held between the most important institutions. It is interesting that for secrecy purposes at the Bank of Lithuania people communicated secretly, sending notes to each other. 

At that time, a new Litas Committee was elected, which consisted of the President (Chair of the Litas Committee), the Prime Minister, and the Chair of the Board of the Bank of Lithuania. Thus, the new members of the Litas Committee were Algirdas Brazauskas, Adolfas Šleževičius, and Romualdas Visokavičius. The Committee stated on 28 April that: all Lithuanian temporary money — talonas, will be exchanged for litas in the same ratio, regardless of the amount available, deposits of convertible currency held in the banks of Lithuania will not be forcibly exchanged for litas, and all monetary resources in Lithuania and abroad, regardless of their origin, are legal assets of natural and legal persons and will not be able to be confiscated.

Shortly before the announcement of the introduction of the litas, a special working group was also gathered to draw up a programme of activities on 1 June 1993 and submit it to the Litas Committee. The work had to be carried out in secret, in accordance with strict security requirements, and the members of the group had to promise in writing to keep secret all information about the features of litas, the time limits for putting them into circulation, and other information containing state secrets.

At the end of the group’s work, the decision was finally taken. On 14 June 1993, the Resolution of the Litas Committee “On the Introduction of the National Currency of the Republic of Lithuania and Removal of Temporary Currency-Talonas” was signed. It was decided: “Since 25 June 1993, the national currency of the Republic of Lithuania, the unit of which is the litas and its 100th part — the centas, shall be issued into circulation.” The banknotes of 10, 20, 50, 100 litas, 1, 2, 5, 10, 20, 50, centas and 1, 2, 5 litas coins of the Republic of Lithuania became legal means of payment. The Government and the Bank of Lithuania were tasked with “confirming the procedure and conditions for withdrawing temporary money-talonas from circulation, establishing that one litas was to be equal to 100 temporary money-talonas.” Companies, institutions, and organisations were obliged, in a ratio of 1: 100, to rewrite invoices, prices of all goods and services, salaries, pensions, scholarships, allowances, other benefits and receipts. Banks were obliged to rewrite balances of funds on accounts, debts, deposits of residents, etc. The Resolution stipulated that “all nominal temporary money-talonas of the 1991, 1992, and 1993 issue shall be withdrawn from circulation as of 25 June 1993 and shall no longer be used as settlement in the Republic of Lithuania as of 20 July 1993.” Soon the introduction of the litas was announced in the media. 

The decision was also made that talonas should be withdrawn from circulation on 25 June 1993 and could be used only until midnight on 20 July 1993. Until the expiry of that period, residents could pay with the talonas in their possession or deposit them in their personal bank accounts.
From 25 June 1993, banks had to issue cash funds for wages, pensions, and other needs as well as residents’ savings in personal accounts, only in litas and cents. The return of trading, payment services companies, institutions and organisations had to be given only in litas and centas. In case of a lack of litas, the return could be given in talonas, but only until 5 July 1993.

All banks exchanged their talonas for litas free of charge. The day of introduction of the litas (June 25) was Friday; therefore, to facilitate money exchange operations, 26 and 27 June (Saturday and Sunday) were announced by order of the Chair of the Board of the Bank of Lithuania as state and commercial bank business days. On those days, talonas were accepted and exchanged for litas, and other related operations were performed.

Both the joy and the curious situations related to the introduction of the litas were described in the media.

“The litas first appeared at Litimpex Bank’s currency exchange, located at Vilnius Railway Station, three minutes after midnight. In the first 15 minutes, the currency exchange office put into circulation 321.35 litas. Even a large number of people who did not want to exchange the currency gathered to see the new money. Especially astonished were those exchanging the Russian currency, receiving only two coins for a thousand roubles.” (Lietuvos rytas, 26 June 1993)

“The first day of the litas was restless and difficult. And a particularly unpleasant event occurred in the Viršuliškiai branch of Vilnius City Žalgiris division Savings Bank — the cashier, exchanging 4.5 thousand talonas, made a mistake and handed over to the client... 4.5 thousand litas. A few minutes later, the woman realised what she had done, but the lucky person had already disappeared." (Vakarinės naujienos, 28 June 1993)

“Along with the litas banknotes, which had to replace the temporary money-talonas, almost 1,000 litas banknote samples were distributed to banks and their branches. Already on 1 July 1993, one such 100 litas banknote with a red inscription in English — “Specimen” — was attempted to use as payment in a private store in Raseiniai. This crime was discovered very quickly by an employee of the Savings Bank, who carried a full set of litas banknote samples to his parents to Raseiniai.” (Lietuvos rytas, 1–3 July 1993)

However, the litas was not met with great enthusiasm. Many were disappointed by the appearance or quality of the money, which was not the highest. However, there weren’t many people protesting against the new currency and the talonas were smoothly exchanged for litas. Almost 200 million litas were issued in the first week, and 8 billion of the 28 billion talonas in circulation returned to the Bank of Lithuania. 

In total, around 215 million units of talonas (a total of 48.8 billion talonas) were withdrawn from circulation by 22 July 1993, including the balance in bank reserve funds. Around 21 million units of talonas (a total amount of 567.7 million talonas) remained. 

The Litas Committee identified the exchange of the temporary money-talonas to litas as the final stage of the establishment of a stable own monetary system. 

Lithuania was the last of the Baltic States to recover its historical monetary unit (Estonia did so already in 1992 and Latvia in March 1993). However, this did not detract from the fact itself. Although it was more a mathematical act, the replacement of one national monetary unit by another, both in the psychological and the political sense the introduction of the litas was very significant. The introduction of the litas was seen as the return of another symbol of the statehood of Lithuania, and the prospects for the country’s economic well-being were also associated with it.