The leu is the official currency of the Republic of Moldova, with the exception of the territory of Transnistria. It is a modern decimal currency that is subdivided into 100 ban. The name of the currency derives from the Romanian word for lion. The current Moldovan leu was introduced in 1993 as a replacement for the Soviet ruble after the collapse of the Soviet Union. The National Bank of Moldova, as the country’s central bank, is responsible for issuing the leu.
The first leu to be used by Moldova was the Romanian leu. Except for a brief period in 1940, the Romanian leu was the official currency of Moldova from 1918 to 1944. Moldova was a Romanian territory in this period, but was captured by the Soviets and incorporated into the Soviet Union during World War II. The Soviet ruble then became the official currency of Moldova until 1991 when Moldova was recognized as an independent nation. In 1992, a temporary currency called the Moldavan cupon was introduced until the leu could begin circulation in 1993. At introduction, the exchange rate was 1 leu: 1000 cupons, and it was pegged to the U.S. dollar before being floating on the foreign exchange in 1998.
The National Bank of Moldova was established in 1991 as the central bank in the nation’s new two-tier banking system, thus eliminating commercial banking from its duties. At the time, the two primary goals of the National Bank were to issue the leu and curb rampant inflation, which was lowered to 104.6 percent in 1995 from 2705.7 percent in 1994. In 1995, the Law on the National Bank of Moldova was passed that established the National Bank as an independent entity responsible only to Parliament.
Moldova’s economy is dominated by the service industry, which accounts for about 75 percent of the total GDP. The service industry took the place of agriculture and manufacturing after the fall of the Soviet Union. Since the turn of the century, Moldova has experienced annual economic growth ranging from 6.1 percent to 8.0 percent. In spite of this growth, the development of a stronger economy is hindered by poor agricultural conditions, widespread poverty and a reliance on fossil fuel imports. Because Moldova is the poorest country in Europe, it is passed over by many investors for neighbouring countries.