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Hyperinflation in Bulgaria from 1996 to 1997 is the 21st largest in the world in the 20th century.
Hyperinflation in Bulgaria from late 1996 to early 1997 is one of the most traumatic experiences for Bulgarians in the last 30 years. Many people today correctly confuse the facts and do not even remember who was in power and what is the sequence of events that led to wages in November and December 1996 and January and February 1997 falling to $ 10 a month and pensions barely enough for 1 kilo of yellow cheese.
According to a 2008 study from the SATO Institute, conducted by Steve Hanke and John Hopkins, there have been 56 cases of hyperinflation in the world during the last 100 years.
2 of these cases are
from Bulgaria
– one is from the beginning of 1991, when the prices of most goods were liberalized, and the second is from 1996-1997.
In the first case, our hyperinflation was ranked 33, with a monthly rate of 123%, that is. prices doubled every 26 days.
However, that of 1996-1997 assigns us the 21st position, because then the monthly rate reaches 242%, that is. prices doubled every 17 days.
The worst hyperinflation of the 20th century occurred in Hungary in the first half of 1946. At that time, monthly inflation reached 13 trillion percent, that is. prices doubled every 15 hours. The banknote with the highest denomination was
100 trillion penguins,
this is the forerunner of today’s forint.
The notorious German hyperinflation that we read about in the Black Obelisk of Remarque is only in fourth place, reaching 29,500 percent per month, or prices have doubled every three days.
Yet all the examples of hyperinflation in the world come from difficult times, or at least the immediate post-war period. However, the Bulgarian examples are from peacetime.
In our country, the first signs that the rise in prices could not be controlled began to be felt already in early 1996, although then inflation could be defined more as
Galloping
– between 10 and 15% per month. The immediate reason is the strong dollarization of the economy, combined with a free exchange rate of the dollar against the lev.
At the same time, the Jean Videnov government was quick to impose stricter administrative controls on prices and foreign trade, disrupting many businesses, especially those related to agriculture and food production.
At the same time, the banking system began to suffocate due to lack of liquidity. In the middle of the year, Industry Minister Kliment Vuchev publicly called out companies in trouble in his speech
stop paying
Bank loans
But even without this call, financial institutions were already in very bad shape, and in September 1996, when nine commercial banks were declared bankrupt, the fragile link between the credit market and the real economy was broken. Businesses had virtually no access to new loans.
In 1996, the state budget was revised three times, after it was adopted only in February 1996, and the cash deficit increased three times. The result was a kind of spiral of domestic debt: the acceleration of inflation caused a premature fall in budget revenues compared to expenditures. In July, for example
VAT has increased by
18 to 22% above,
but that didn’t help either.
In late fall 1996, experts advised the BNB to impose a fixed exchange rate of the lev per dollar, but no one could bear the political weight of such a decision because Jean Videnov resigned and his ally Nikolay Dobrev took office.
After a pause in the days around Christmas and New Years, in early January, hyperinflation broke out. On January 8, 1997, the newspaper “24 Chasa” reported that only during the last 3 days food in our country has risen in price by 50%.
In anticipation of higher prices, basic food products began to disappear from stores because merchants were at a loss as soon as they sold.
In early February, store prices began to change by the hour. The dollar reached 3,000 BGN and even the bread was calculated in cents. On February 2, for example, cheese cost BGN 1,700 per kilo. February 4
in the morning it already had a price
2,200 BGN and 3500 BGN at night.
Even the resigned Finance Minister Dimitar Kostov was forced to admit that there were signs of hyperinflation. Not that it reassured anyone. The calm began to arrive only in April and May, when the interim government of Stefan Sofiyanski came to power.
The infographic on the right shows that during the entire period of the Jean Videnov government, inflation was 2554%, which in practice means that prices have risen about 30 times.
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