In the early and mid-1990s, Lithuania's economy went through a dynamic transition from the centralized economy prevalent during Soviet control of Lithuania to a market-driven economy dominated by private enterprise and oriented toward trade with Western Europe and North America. This transition began in 1991, and the volatile first stage--structural adjustment--was largely complete as of 1994. During this period, the economy declined precipitously while the Lithuanian government implemented fundamental economic reforms, including price reform, privatization, government reform, introduction of the litas (pl., litai) as the national currency (for value of the litas--see Glossary), and trade adjustment. Dependence on Russian energy hampered Lithuania's economy at a crucial time of transformation from the centralized state-run economy to a free-market system. Industrial production in Lithuania dropped by 36 percent from December 1992 through June 1994.
Despite these grim statistics, Prime Minister Adolfas Slezevicius was determined to adhere strictly to International Monetary Fund (IMF--see Glossary) recommendations for a speedy transition to a market economy. Slezevicius maintained that former socialist countries that did not rapidly reform fared far worse than those that did. The IMF noted that substantial progress had been achieved in Lithuania between 1992 and 1994 and that, after successfully reducing inflation, the country was ready to turn its attention to reforming its tax, privatization, social security, and finance policies.
Economic recovery began at minimal levels in mid-1993 and continued subsequently as a result of an increase in foreign assistance, loans and investment, trade, and private-sector employment. Most foreign investment came from the United States, Russia, Germany, Britain, Austria, and Poland.
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