30th anniversary of the litas. The first steps towards issuing the litas

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, let us remember the very beginning, when not only the litas, but also independent Lithuania did not yet exist, although it was already rapidly moving towards freedom. The introduction of the national currency was becoming an increasingly important issue. 
So, before the restoration of independence, discussions about the need for the nation’s own money began. The political and economic reforms launched by the USSR in the 1980s, aimed at partially democratising the state and raising the level of its economy, gave impetus to the debate.

As a Soviet republic whose economy was fully integrated into the economy of the Soviet Union, Lithuania was among the first to try to exploit the opportunity offered by reforms to seek economic independence and, later, political independence. The course of restructuring, the emerging problems, and ways to overcome them were discussed in detail at the meeting of Lithuanian and Estonian scientists at the Economics Institute of the Academy of Sciences of the Lithuanian SSR on 26 May 1988. At this meeting, S. Uosis, a lecturer at the Faculty of Economic Cybernetics and Finance at Vilnius State University, raised the idea of creating the country’s own money for the first time and tried to justify its necessity. 

From that moment on there was a fierce debate in society as to whether the common monetary system (the rouble) would continue to operate in economically autonomous republics, or whether it will be necessary to introduce their own monetary systems. Most scientists thought that nothing had to be changed at the time. A separate monetary system for the republic raised associations with separatism, the issue was very complex, so it was difficult to say something unambiguously, and even more so to make a decision. 

However, a working group of scientists who supported the idea prepared the concept of Lithuania’s economic independence. It set out the concept of the independence of the republic. The credit and monetary system had been identified among the most important aspects of economic independence. It is stressed that a strong monetary unit is a prerequisite for the economic independence of a republic, and that republics must maintain economic relations through the market — free trade, at market prices — and use their own currency as well as not be bound by any orders from allied ministries. The previous common currency, the rouble, was seen as a currency basket of the USSR’s common market allied republics, meant to determine the exchange rate and conversion between them. 

Such radical ideas, of course, were not supported by many representatives of the Soviet nomenclature and some scientists-economists. Arguments in the media, the Supreme Council of the LSSR, commissions, and working groups took place among representatives of various political and economic ideologies. Some tried to deny the need for their own monetary system, others only doubted it. It was also considered that regardless of the form of the monetary obligation (rouble, litas, dollar, ECU, etc.), it was important for the currency unit to be sufficiently negotiable (convertible), satisfying buying and selling operations. However, in society and discussions, the idea that Lithuania can be independent, perhaps even free, was growing stronger, and an independent monetary system was no less necessary than the country’s own language. This view was also taken by the Lithuanian Reform Sąjūdis.

The 11th session of the Supreme Council of the Lithuanian SSR took place on 18 May 1989. It amended Article 70 of the Constitution of the Lithuanian SSR and thus established the rule of law of Lithuania. This article stated that “Only the laws adopted by its Supreme Council or by referendum shall apply to the Lithuanian SSR. The laws of the USSR and the legal acts of the authorities and governing bodies of the USSR shall be valid in the territory of the Lithuanian SSR only after they have been approved and registered by the Supreme Council of the Lithuanian SSR in accordance with the established procedure,” and the amended Article 11 abolished the ownership of the USSR in the territory of Lithuania. In the declaration of the same day, “On the State Sovereignty of Lithuania,” for the first time, an official document named the occupation of 1940 and expressed the determination to seek the restoration of the statehood of Lithuania. The Law on the Basis of the Economic Independence of the Lithuanian SSR, adopted by the Supreme Council of the Lithuanian SSR on 18 May 1989, legally legitimised the possibility of introducing own money. It provided that “the Law of the Lithuanian SSR may introduce its own money and credit system to ensure the equivalent of inter-public economic relations, to implement the Republic’s economic independence and to protect the interests of the economy and residents.” 

V. Terleckas, an associate professor at Vilnius University, was appointed as the head of the Lithuanian independent monetary and credit system development group set up under the Council of Ministers. Researchers and banking specialists worked in the group. Numerous laws and other legal acts of various countries related to the functioning of the monetary and credit system were studied and the experience gained by these countries in drafting laws was analysed. Soon, the draft laws of the Bank of Lithuania and Commercial Banks as well as other normative documents were prepared and they became the basis for the adoption of later legal acts. 

This concept stipulated that Lithuania’s autonomous credit system was to consist of the central Lithuanian central bank, created from the Republic of Lithuania bank of the USSR State Bank, performing the functions of a bank of issue, a state cashier, and a bank of banks, as well as share-based commercial banks, savings banks, cooperatives, and credit cooperatives. It was believed that the correct and politically harmless way of introducing the nation’s own money was to replace the existing roubles in circulation into litas by a ratio of 1:1 (of course, this was highly optimistic). With the lack of experience in this field and without knowing how further relations with the USSR would develop, various options for the introduction of Lithuania’s money were considered. Money production was also a matter of concern. 

Over time, under the auspices of the Supreme Council of the LSSR, and with the support of and pressure from the Sąjūdis, the public, and the media, legislation was supposed to be adopted to bring about the restoration of full independence. And they were adopted.

The resolution “On the liquidation of the 1939 German-USSR Treaties and their consequences for Lithuania,” adopted at the last session of the Supreme Council of the LSSR on 7 February 1990, was the most important step that brought Lithuania “to the brink of the restoration of independence.” The Supreme Council decided to declare “that the declaration of Lithuania’s accession to the USSR of 21 July 1940 by the Lithuanian People’s Seimas, which did not express the will of the Lithuanian people, is illegal and invalid. The law of the USSR of 3 August 1940 ‘On the Admission of the Lithuanian Soviet Socialist Republic to the Union of Soviet Socialist Republics’ is illegal and is not legally binding by Lithuania,” and to propose to the USSR to start bilateral negotiations on the restoration of the independence of the State of Lithuania. This session of the Supreme Council adopted on 13 February 1990 the Law and Resolution of the Bank of Lithuania to establish the Bank of Lithuania from 1 March 1990, which was to carry out a monetary issue.