Officials laud early 1990s monetary reform as the most successful and fundamental reform in Latvia [05 Mar 2003]

Monetary reform in Latvia at the beginning of 1990s has been one of the most successful and fundamental reforms undertaken in the country, the "reformers" themselves claimed on 5 March 2003, at a conference dedicated to the tenth anniversary of the Latvian national currency - the lat.

In opening the conference, Bank of Latvia President Ilmars Rimsevics said that every independent nation has as its symbols a flag, national anthem and its own national currency. He underlined the attractiveness of the lat coins and banknotes.

Prime Minister Einars Repse, former member of the Monetary Reform Committee and President at the Bank of Latvia, said that issuing five-lat banknotes depicting an oak, symbolising strength, had put an end to all doubts.

Repse looked back at monetary reform in Latvia and commented on the Latvian rouble, introduced prior to issue of the lat to put an end to Latvia's economic dependence on Russia. The Bank of Latvia's proposal to introduce the Latvian rouble had been backed by the Council of Ministers, which showed the government's confidence in the central bank, said Repse.

Introducing the Latvian rouble as the first stage of monetary reform was successful, in large part thanks to the Bank of Latvia. Latvia dropped the Russian rouble and adopted its own transitory currency only at the last moment, because after this the value of Russian rouble started to plummet.

According to Repse, the Bank of Latvia pursued a strict monetary policy upon introducing the Latvian rouble, which resulted in a stabilisation of prices and prevented bouts of hyperinflation. Introducing the lat simply concluded the reform process.

One lat was exchanged for 200 Latvian roubles to keep the one-santim coin in turnover. A matchbox then cost 2 Latvia's roubles, hence the exchange rate.

The entire reform was gradual, so that residents could get used to the changes without problems, Repse stressed.

Ivars Godmanis, Prime Minister at the time monetary reform was being carried out, told the conference that it was one of the most fundamental reforms of the beginning of the 1990s, building on other reforms of the time - liberalisation of prices, the launch of privatisation, land reform, and denationalisation.

Ojars Kehris, member of the Monetary Reform Committee and Chairman of the Supreme Council's Economic Commission at the time of the reform, said that the stability of the national currency has stimulated many aspects of the national economy.

The lat promoted the establishment of the banking system; attracted investments; and assisted with the development of external trade, the restructuring of the industrial sector and stabilisation of the social sector. "Monetary reform has been the most successful economic reform in Latvia. It was the right idea, carried out at the right time and in the right way," Kehris said.