| Description | During World War I, Germany established Ober Ost (also Obost) in the occupied territories of the former Russian Empire. It circulated special currency, German ostmark and German ostruble (collectively known as ostgeld), administered by Darlehnskasse Ost (Loan Bank of the East or Eastern Credit Bank). After the German surrender, other countries hastily introduced their own currencies to replace the now-obsolete ostmark. On December 31, 1918, the Lithuanian government signed an agreement with Germany that it will continue to honour ostmark without structural changes to the fiscal regime. In exchange, Lithuania received a much-needed loan of 100 million marks at 5% annual interest to finance its newly formed state institutions and army at the outbreak of the Lithuanian-Soviet War.
On February 26, 1919, Lithuania officially renamed ostmark as auksinas and pfennig as skatikas (1⁄100 of auksinas). The notes continued to be printed and administered by Darlehnskasse Ost. The exchange rate was set 1:1 with German Papiermark which meant that auksinas was guaranteed by the Weimar Republic. As such, auksinas was subject to the same high inflation that plagued the Weimar Republic. Various Russian revolutionary money that circulated unofficially were also subject to high inflation in Soviet Russia. Lithuania was flooded by cheap paper money that was used to buy Lithuanian goods and raw materials further crippling Lithuanian economy. Under such circumstances, Lithuania needed to establish its own currency. It melted 3 million gold rubles received according to the Soviet-Lithuanian Peace Treaty of July 1920 to establish its own gold reserves.
It was then able to introduce fully gold-backed Lithuanian litas on October 2, 1922. The exchange rate was allowed to fluctuate with the market. The initial exchange rate of 175 auksinas for 1 litas dropped to 850 auksinas by the end of the year. |
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