20000 Leva (Bulgarian National Bank) – Bulgaria

In 1999, Bulgaria was in the midst of a critical and transformative period following a severe financial and banking crisis in 1996-1997. That earlier crisis had caused hyperinflation, a collapse of the banking system, and a dramatic plunge in living standards. In response, in July 1997, the country introduced a Currency Board Arrangement (CBA), which pegged the Bulgarian lev (BGN) firmly to the German Deutsche Mark at a rate of 1,000 lev = 1 DM (redenominated to 1 BGN = 1 DM in 1999). By 1999, this strict regime was the defining feature of the currency situation, providing much-needed stability but also imposing significant constraints.

The CBA functioned by requiring the Bulgarian National Bank (BNB) to back the entire monetary base with foreign reserves, eliminating its ability to act as a lender of last resort or conduct independent monetary policy. This institutional straitjacket successfully tamed inflation, restored confidence in the lev, and laid the groundwork for economic recovery. However, in 1999, the economy was still grappling with the CBA's downsides: interest rates were largely dictated by the European Central Bank (which now governed the Deutsche Mark), limiting tools to combat a recession, and the rigid peg made the export sector vulnerable to external shocks.

The year 1999 was thus a period of consolidation under the Currency Board. The macroeconomic situation stabilized, with inflation falling to single digits and foreign reserves growing steadily. This stability was crucial as Bulgaria navigated the aftermath of the Kosovo War, which disrupted regional trade. The successful maintenance of the peg throughout 1999 reinforced its credibility, setting a course for the eventual redenomination of the lev in July 1999 (lopping off three zeros) and paving the way for Bulgaria's broader European integration, with the long-term goal of Eurozone membership firmly linked to the stability provided by the DM (and later euro) peg.