A special publication presents an outlook of the currency board’s advocates and opponents after ten years
On April 1, 2004 the currency board system marked its ten-year anniversary in Lithuania. This reform has helped stabilising the country’s troubled economy after stormy fluctuations and scandals triggered by policies of Lithuania’s central bank.JN0-533
Thanks to this monetary-policy regime, the economy gained a long-term stability, hyperinflation plummeted to its record lows, and money was safeguarded against government intervention and manipulation.
After heated and lengthy debates in political and business circles, on April 1, 1994 the Law on Litas Credibility was adopted which pegged the national currency – litas – to a stable anchor currency at a fixed exchange rate. At the start the litas was tied to the US dollar and on February 2, 2002 it was re-pegged to the euro. Although the currency board was criticized for inflexibility, the transparency and reliability of the Lithuanian monetary system increased and the results were striking. In just the first six months after its introduction interest on loans skidded down twice and three-digit inflation started to fall at a rapid pace.
The currency board was predicted a short life, nevertheless, it has survived repeated attempts made by the business community and the government to eliminate it. Today scarcely anyone doubts that this monetary-policy regime will be preserved until Lithuania joins the European Monetary Union where monetary policy is steered by the European Central Bank. After ten years a number of monetary policy specialists and even opponents admit that the launch of the currency board arrangement has been the most successful and the weightiest economic reform in Lithuania.
Commemorating the tenth anniversary of the currency board in Lithuanian, the Lithuanian Free Market Institute (LFMI) has released an electronic publication “The Free Market” which presents its champions’ and opponents’ approach to the currency board after a decade.
The publication contains opinions, evaluations and recollections of those who took an active part in piloting this reform in Lithuania: the-then Prime Minister Adolfas Slezevicius, LFMI’s Chair of Board Elena Leontjeva, Chief Economic Adviser to the President of Vilniaus bankas Gitanas Nauseda, Head of the Monetary Policy Division of the Bank of Lithuania Sigitas Siaudinis,700-501
and Senior Economist to the Vice Chairman of the Joint Economic Committee of the U.S. Congress Kurt Schuler.