29 November 1993. National currency - Moldovan leu - introduced in Moldova

Diverse coins, most often foreign ones, circulated on the territory of the medieval Moldovan state. Yet, they did not replace the exchanges in kind, which was dominating in the trade, but they were facilitating the transactions where the exchanges in kind were impossible. In the beginning of the 17th century, the Dutch coin, leeuwendaalder, on which there was the image of a lion, appeared in the Romanian Principalities. Afterwards, the name of ‘’lion’’ was assigned to other currencies as well. The ‘’ban’’(hundredth part of 1 leu) got into the Principalities from the western Balkans and extended more in Oltenia.    

The unification of the Principalities made the creation of the single national currency badly necessary. The introduction of the notion of ‘’leu’’ and ‘’ban’’ in the collective mentality imposed their acceptance as official name. Thus, in 1867, after the Union of the Romanian Principalities, the national currency of Romania was called ‘’leu’’. 

Bessarabia in 1812 was annexed to the Russian Empire and the Tsarist authority imposed the Russian rouble. The most interesting moment appeared following the World War II, when three currencies were circulating simultaneously in Bessarabia: the Romanian leu, the German mark and the Soviet rouble. Once Bessarabia annexed to the USSR and after the return to the Moldovan Soviet Socialist Republic (RSSM), the Soviet rouble became the only currency.     

Followings dozens of years of stability based on the chronic deficit of consumer goods, the rouble started devaluing in the end of 1980s. The ever deeper crisis of the Soviet economy and the unbalanced monetary and financial policy of the USSR’s government triggered a galloping inflation. The Soviet republics back before the proclamation of their independence began the preparations for the introduction of the national currencies. In Moldova, unfortunately, the leadership acted irrationally. Food products, beverages and goods were exported against the roubles which were quickly devaluing. The Baltic Countries were acting differently: they were buying metals, fuels, technology, food products and drinks and were releasing themselves from the Soviet rouble.  

The first democratically elected parliament, being aware that Moldova remains behind other post-Soviet countries as regards the preparation for switching to the national currency and being guided by the explicit provision from the Declaration on Independence on this subject, held a meeting for discussions on 22-23 January 1992. The debates were hot; yet, consensus was reached on most issues. In the end, the situation worsened on the issue of the name of the national currency. The democrats were making reference to the tradition and history of the national currency and were suggesting the leu. The conservative side was opposing this, putting that we borrow something Romanian again. The agrarians were inspired from a speech in parliament of a great economist and former adviser at two American presidents, Anghel Rugina. Namely the latter suggested that the name of ducat was opportune too, as it circulated in the Romanian principalities 200 years ago. Eventually, experts managed to persuade the majority that the variant ‘’Moldovan leu’’ was the most successful one and thus, the national currency received the parliament’s vote of confidence. On 22 January 1992, the parliament adopted the law on the monetary circulation.        

The slow paces with which the preparation for the introduction of the national currency was going imposed President Mircea Snegur to issue a decree on the creation of the Committee on Monetary Reform on 9 December 1992. 

Painter and drawer, author of the Coat of Arms Gheorghe Vrabie was chosen to elaborate the picture of the national currency.   

On 24 November 1993, President Mircea Snegur issued the decree, On the introduction of the national currency of the Republic of Moldova. The decree read that, ‘’the national currency – Moldovan leu -, equal with 100 bani, is introduced in Moldova as of 29 November. The exchange of all financial means in cash and from accounts, in circulation in Moldova, including the residents’ deposits, will be made till 2 December 1993, 18:00, at an exchange rate of 1,000 coupons for 1 leu. Starting from 18:00, on 2 December 1993, the leu is regarded as the sole legal payment means on the territory of Moldova.’’   

Just since the beginning of the adventure of the Moldovan leu, the National Bank of Moldova (BNM) has promoted a quite restrictive monetary policy. The refinancing rates for commercial banks reached almost unusual levels (377 per cent in March 1994). At the first stage, the minimum compulsory reserves for the commercial banks were relatively high, about 28 per cent. Yet, afterwards, at a suggestion by international experts, the level of the refinancing rate was relaxed and the level of the minimum compulsory reserves was reduced from 12 per cent in late 1995 to 8 per cent in late 1996. The well thought out actions in the reforms’ implementation made Moldova to get favourable quotations from international agencies (Moody’s) in 1990s.

The national currency had two significant depreciations. The first one took place in 1998, when the Russian rouble depreciated overnight by 200 per cent. The influence of the Russian rouble’s fall on the Moldovan leu was direct, as the payments were made in roubles in the Commonwealth of Independent States. A latent, but constant depreciation started in 2014. At that time, the banking system was strongly robbed by two big criminal combinations – the Laundromat and the one-billion-dollar theft. The effects of these robberies are felt at present too.    

The remittances have a considerable contribution to the maintaining of a relative macro-financial stability. About 1.3-1.4 million dollars are annually transferred by the Diaspora to Moldova. Yet, the corruption at the highest level essentially diminished the positive impact of the annual increase in the remittances.  

The Moldovan leu followed the trajectory of the economic and political evolution in Moldova in those almost three decades of existence. A national currency cannot be stable where the political instability persists and the corruption phenomenon flourishes. The Moldovan leu can become really strong only in conditions of a coherent political course, which will generate friendly conditions for an economy in permanent development and released of voluntarism and corruption. Nevertheless, 28 years after its introduction in circulation, the Moldovan leu proved that it can represent the structure of a sustainable economy in a state in full self-assertion on the most important dimensions.