Inflation in Lithuania

A short history of inflation in Lithuania

Leaving the Rouble (1991 to 1994)

Lithuania issued a transitional coupon currency in 1991 and the litas in 1993, during the inflation that followed the Soviet collapse. In April 1994 it adopted a currency board fixing the litas first to the United States dollar and later to the euro, removing the central bank's ability to create money for the government and settling the question of credibility in a single step.

The Currency Board to the Euro (1994 to 2015)

The peg survived the Russian crisis of 1998 and the severe recession of 2009, when Lithuania, like its Baltic neighbours, adjusted through falling wages rather than devaluation. It adopted the euro on 1 January 2015, the last of the three to do so.

Post-Covid Inflation (2021 to 2023)

In Lithuania, prices rose fastest in September 2022, at 22.5%. The causes of the post-Covid inflation were global in nature, beginning with the lockdowns: factories and ports closed and the shipping between them fell out of sequence, so goods took longer to make and longer to arrive. Governments had spent heavily supporting household incomes through those closures, so when restrictions lifted there was money waiting to be spent and not enough on the shelves to spend it on. Then in February 2022 Russia invaded Ukraine, disrupting two of the world's largest suppliers of wheat, fertiliser, oil and gas at once, and the cost of everything grown, heated or transported rose with them.

Because the causes were shared, so was the timing: most countries peaked within a few months of one another in late 2022. The major inflation events covers this episode and the others in more detail.