The National Currency of Latvia

After the proclamation of the Republic of Latvia in 1918, a large variety of different currencies were in circulation - ostrubles and ostmarks, German reichsmarks, the so-called Tsar rubles and kopecks, the so-called Money of Duma and kerenkas, as well as promissory notes of several town municipalities.

On December 11, 1918, the Minister of Finance set official exchange rates for the currencies in circulation, thus recognizing three foreign currencies as legal tender. As Latvia was a newly established state, it did not have a national currency and, therefore, faced the need to introduce a currency of its own.

On March 22, 1919, the Provisional Government of Latvia authorized the Minister of Finance to issue the first money notes of the Republic of Latvia - Treasury notes; they were named Latvian rubles and Latvian kopecks. In the period from April 1919 to September 1992, money notes were issued in denominations of 1, 5, 10, 25, 50, 100 and 500 rubles, and in denominations of 5, 10, 25 and 50 kopecks. The authors of these notes' graphical design were Latvian artists Julijs Madernieks, Burkards Dzenis, Vilhelms Krumins, Hermanis Grinbergs and Rihards Zarins. Issues of Treasury notes marked the beginnings of an independent Latvian monetary system although Russian and German currencies continued as legal tender in Latvia.

On August 3, 1922, the Cabinet of Ministers approved "Regulations on Money". The national currency of Latvia was named the lats, and the hundredth part of a lats was named santims. The Latvian ruble remained in circulation alongside the lats.

In order to ensure the implementation of monetary policy, the Constitutional Assembly adopted the law on founding the Bank of Latvia on September 7, 1922. The right to issue the national currency was vested with the Bank of Latvia. On November 2, 1922, the Bank of Latvia issued the first provisional banknotes - 500-ruble notes with an overprint.

From 1922 to 1940, the Bank of Latvia issued banknotes in denominations of 10, 20, 25, 50, 100 and 500 lats. In 1923, 100-lats banknotes were issued. The graphical design of the note was worked out by artists Rihards Zarins and Karlis Krauze. Security features incorporated in the banknotes printed at the State Securities Printing House did not provide for enough security; therefore, in accordance with the resolution of the Board of Governors of the Bank of Latvia, in the period from 1924 to 1938 all Bank of Latvia banknotes were printed in the United Kingdom. The graphical designs of these banknotes were created by British artists. The only exception was the 100-lats banknote of the 1939 issue which was printed at the State Securities Printing House and was designed by artists Janis Sternbergs and Karlis Krauze.

The Ministry of Finance issued State Treasury notes in denominations of 5, 10 and 20 lats. These notes were printed at the State Securities Printing House. The authors of the graphical designs of these notes were Rihards Zarins, Karlis Krauze and Harijs Gricevics.

Coins were issued in denominations of 1, 2 5, 10, 20 and 50 santims, and 1, 2 and 5 lats. The designs of the coins were created by three artists: Rihards Zarins (santims coins of the 1923 issue and 5-lats coins), Janis Roberts Tilbergs (1- and 2-lats coins) and Ludolfs Liberts (santims coins, the 1937 issue).

On June 17, 1940 Latvia was occupied by the Red Army, and on August 5 it was incorporated into the Union of Soviet Socialist Republics. Beginning with October 10, 1940, the Latvia Republican Office of the State Bank of the USSR, which was a constituent part in the centralized Soviet banking system, took over the rights of the Bank of Latvia. The USSR's monetary system was gradually introduced in Latvia. With the resolution of the Popular Council of Commissars of the Latvian SSR passed on November 25, 1940, the exchange rate of the lats against the USSR ruble was determined (1 lats = 1 ruble). This marked the beginning of a simultaneous circulation of two currencies in Latvia, which lasted for four months. Without prior notice, the lats was withdrawn from circulation on March 25, 1941. The USSR ruble became the only legal tender in Latvia.

In June 1941, German troops advanced into Latvia. Right after the entrance of German army, the Bank of Latvia resumed its activity; however, the Bank did not regain its right to issue currency. The occupation power implemented a policy that was tailored specially for occupied countries, its aim being the suppression and robbing of these countries. The instrumental to achieve this was the introduction of a special currency - reichsmarks. Reichsmarks circulated alongside USSR rubles, the exchange rate being 10 rubles = 1 reichsmark.

After the Second World War, Latvia was again incorporated into the Soviet financial system. The State Bank of the USSR (Gosbank) both issued money and functioned as the State Treasury. The monetary system of the Latvian Soviet Socialist Republic was entirely controlled by the Gosbank.

In 1987, the Latvia Republican Office of the State Bank of the USSR was renamed the Latvia Republican Bank of the State Bank of the USSR; however, it did not become a central bank with the right to issue the national currency.

On March 2, 1990, the Supreme Council of the Latvian SSR passed the Resolution "On the Bank of Latvia". It stipulated that the Bank of Latvia, a local central bank, was established (actually restored) in the Latvian SSR. This was a central bank - an independent state bank, which had the exclusive right to issue the national currency. However, it was only after the declaration of independence of the Republic of Latvia on May 4, 1990 and the collapse of the USSR that in accordance with the Resolution of the Supreme Council of the Republic of Latvia "On Reorganization of Banks in the Territory of the Republic of Latvia" passed on September 3, 1991 the Bank of Latvia became a central bank with the right to issue the national currency. The Republic of Latvia Laws "On Banks" and "On the Bank of Latvia" reinforced the status of the Bank of Latvia as a central bank with whom the right to issue the national currency had been vested.

On July 31, 1990, the Supreme Council of the Republic of Latvia passed the Resolution "On Program of Creating Republic of Latvia Monetary System". The Bank of Latvia commenced the restoration of the national currency. The Monetary Reform Committee of the Republic of Latvia was established, and on May 4, 1992, it passed the resolution on introducing the temporary currency - the Latvian ruble. Latvian ruble notes were issued in the following denominations: 1, 2, 5, 10, 20, 50, 200 and 500 (artist Kirils Smelkovs). The national currency - the lats - was introduced in 1993. Imants Zodziks and Valdis Osins were the authors of the graphical design of 5-, 10-, 20-, 50-, 100- and 500-lats banknotes, and Gunars Lusis and Janis Strupulis were the authors of the graphical design of 1-, 2-, 5-, 10-, 20-, 50- santims and 1- and 2-lats coins. The successful reform ending in the introduction of the lats provided for the accumulation and turnover of capital, and transition to a market economy.