BGN - Bulgarian Lev

The History of Bulgarian Lev

The Lev has undergone several changes throughout its history in the following phases:

• First Lev (1881 - 1952): The Lev was introduced in 1881 and was initially valued equivalent to the French Franc. However, it faced significant challenges during World War I and World War II, leading to substantial devaluation.

• Second Lev (1952 - 1962): In 1952, a revaluation took place where 1 new Lev was equal to 100 old Leva due to the effects of inflation. This new Lev was pegged to the US dollar at a rate of 6.8 Leva to 1 dollar.

• Third Lev (1962 - 1999): Another revaluation occurred in 1962, with 1 new Lev exchanging for 10 old Leva.

• Current Lev (from 1999): The current Lev (BGN) was introduced in 1999, where 1 new Lev equaled 1,000 old Leva. Since 1997, the Lev has been fixed to the Euro at a rate of 1 Euro = 1.95583 BGN, and Bulgaria is preparing to adopt the Euro in the future.

Bulgarian Lev denominations

The Bulgarian Lev (BGN) is currently issued in both paper and coin forms, with the following denominations: 

• Coins: The Lev has coin denominations of 1, 2, 5, 10, 20, and 50 stotinki. In 2022, the 1 Lev coin replaced the paper note of the same value, while the 2 Lev coin replaced the corresponding paper note in 2015.

• Banknotes: Since its introduction in 1999, paper banknotes have been issued in denominations of 1, 2, 5, 10, 20, and 50 leva. The 100 leva note was introduced in 2003. However, the 1 and 2 leva paper notes were later replaced by their coin counterparts and are no longer in circulation as banknotes.

National issues and the future of the Bulgarian Lev (BGN)

The Bulgarian Lev (BGN) plays a vital role in Bulgaria's economy, but it faces various challenges and issues related to the country's political and economic landscape.

National issues of Bulgaria

Bulgaria is moving towards the goal of joining the Eurozone. Therefore, the government's efforts to improve the financial system and comply with EU standards are crucial for this accession process. A thorough restructuring of Bulgaria’s fiscal and monetary policies is required to meet the stringent requirements of the European Union’s Economic and Monetary Union (EMU).

Furthermore, to successfully adopt the Euro, Bulgaria must control inflation, stabilize interest rates and maintain sustainable fiscal position. These factors are also directly tied to the value of the Bulgarian Lev. If these factors are handled well, Bulgaria can not only facilitate a smooth transition to the Euro but also preserve the Lev’s standing in global markets.

Transitioning from the Lev to the Euro could contribute to greater stability, but it also poses significant challenges related to fiscal and monetary policy, inflation, and public debt management. One of the primary concerns is the loss of independent monetary policy. Under the Eurozone regime, the interest rates or management over the Lev is no longer in the hand of the Central Bank. Instead, European Central Bank (ECB) holds the control and their policies does not always align with those the Bulgarian Central Bank.

Public debt management is another major concern. While Bulgaria has relatively low public debt compared to other EU nations, the government must maintain prudent fiscal policies to meet the EU's debt and deficit thresholds. Failure to do so could hinder the transition to the Euro.

The future of Bulgarian Lev

The future of the Bulgarian Lev is greatly influenced by various economic, political, and strategic factors of the country. Below are the opportunities and challenges facing the Bulgarian Lev in the coming period:

• Benefits of Joining the Eurozone: Switching to the Euro would provide Bulgaria with greater financial stability, reducing exchange rate risks and attracting more foreign investment. This could promote economic growth and improve national credit by leveraging the Euro's stability.

• Challenges of Joining: After joining the Eurozone, Bulgaria would lose control over its national monetary policy and have to adhere to the EU’s stringent financial requirements. In order to fully integrate into the European economic landscape, Bulgarian government is to commit to total financial reforms and EU standards. This could be a lengthy and complex process, requiring significant effort, resources, and political commitment to ensure a smooth and effective transition.

All in all, the future of the Bulgarian Lev is closely tied to Bulgaria’s process of joining the Eurozone. This process presents promising prospects for financial stability and economic growth but also comes with significant challenges that Bulgaria must overcome. Therefore, thorough preparation is crucial for the country's successful integration.

Bulgarian Lev’s exchange rate

Bulgarian Lev was initially pegged to the Deutsche Mark at parity. When the Euro replaced the Deutsche Mark, the Lev was pegged at a fixed rate of 1.95583 BGN to 1 Euro, or 1 BGN = 0.5113 EUR. This stable exchange rate has been maintained due to Bulgaria's policy of pegging the BGN to the Euro.