History of Kuwaiti dinar and why it is the most valuable in the world today
I wanted to add this page to my blog so all you investors in the Iraqi dinar have some TRUTH to stand on as to why you decided to invest in the Iraqi dinar. Many of these so-called intel gurus on the internet keep using this analogy and comparison of a projected Iraqi dinar revaluation to the Kuwaiti dinar revaluation. They use this as the basis to rope you in to purchase the IQD and then to follow them faithfully, hoping and wishing for the infamous any day / everyday scenario of an RV of the IQD. So let’s set the record straight today and get the FACTS right about the Kuwaiti dinar.
KUWAIT: In the middle of the 20th century, the Indian rupee served as the official currency in the eastern Arabian Peninsula, encompassing Kuwait, Bahrain, Qatar and Oman. The Indian rupee was pegged to the British pound at a rate of 13-1/3 Indian rupees. The Gulf rupee was introduced by the Indian government in 1959 as a response to the strain placed on Indian foreign exchange reserves by gold smugglers. These smugglers brought gold to the Indian subcontinent and exchanged it for Indian rupees, which were in circulation in the eastern Arabian Peninsula.
The smugglers then used these rupees to purchase more gold, ultimately depleting India’s foreign cash reserves and causing economic harm. Initially, the Gulf rupee was on par with the Indian rupee and was introduced to replace the Indian rupee exclusively outside India. However, on June 6, 1966, India devalued the Gulf rupee against the Indian rupee. Following this devaluation, several states that were still using the Gulf rupee adopted their own currencies. The Kuwaiti dinar was introduced in 1961 to replace the Gulf rupee, which was equal in value to the Indian rupee.
Initially, it was equivalent to 1 pound sterling. During the Iraqi invasion of Kuwait in 1990, the Iraqi dinar replaced the Kuwaiti dinar, with large amounts of banknotes stolen by invading forces and the drastic devaluation of the Kuwaiti dinar, which severely affected the country’s economy during the war. During the US coalition to throw Iraq out of Kuwait, the Kuwaiti dinar was stripped off of the currency exchanges much like they did for Iraqi dinar during the 2003 US led coalition to overthrow Saddam Hussein. After liberation of Kuwaiti in 1991, the Kuwaiti dinar was reinstated. A new series of banknotes was introduced to replace the previous notes, including the ones that were stolen.
Frequently Asked Questions (FAQs):
1. How often does Kuwait revalue its currency?
Kuwait has only undergone a significant currency revaluation once, in 1991. The rate on FOREX seems to fluctuate between $3.40 to $3.65 dinars per US Dollar.
2. Why did Kuwait revalue its currency in 1991?
After the liberation of Kuwait from Iraqi occupation, revaluing the currency was necessary to restore confidence, establish stability, and reflect the country’s economic strength. There is a further explanation below.
3. What was the exchange rate before the currency revaluation?
Prior to the revaluation, the exchange rate while under Saddam Hussein’s short occupation was approximately 1 Kuwaiti Dinar to 0.30 USD.
4. What was the new exchange rate after the revaluation?
The exchange rate after Saddam Hussein was kicked out of Kuwait and the revaluation occurred was set at 1 Kuwaiti Dinar to 3.47 USD.
5. Did the revaluation result in an increase or decrease in the currency’s value?
The revaluation significantly increased the value of the Kuwaiti Dinar. But remember the Kuwaiti dinar was never ripped off of FOREX in the first place and then reinstated, which has to take place for the Iraqi dinar to revalue significantly. Instead, it just revalued back to its nominal value after order was restored back to Kuwait. Very different situations to consider.
6. How did the revaluation affect Kuwait’s economy?
The revaluation helped boost confidence in Kuwait’s economy and positioned the country as a strong player in the global market.
7. Is the Kuwaiti Dinar still pegged to the US Dollar?
Yes, the Kuwaiti Dinar remains pegged to the US Dollar.
8. Can individuals exchange their old Kuwaiti Dinars for the new ones?
Yes, individuals were given a specific period to exchange their old Kuwaiti Dinars for the newly issued ones after the revaluation in 1991. More on this in the article below.
9. Are there any plans for future currency revaluations?
There have been no official announcements regarding future currency revaluations in Kuwait, although some say it will be 25 cents less than the Iraqi dinar when the IQD does it’s major revaluation / reinstatement.
10. How does the revaluation impact Kuwait’s imports and exports?
The revaluation can influence Kuwait’s imports, making them relatively cheaper, while exports might become more expensive, potentially affecting trade dynamics.
11. Does the revaluation affect Kuwaiti citizens’ purchasing power?
The revaluation generally enhances the purchasing power of Kuwaiti citizens, allowing them to afford more goods and services.
12. How does Kuwait maintain the stability of its currency after the revaluation?
The Central Bank of Kuwait employs various monetary policies and interventions to ensure the stability of the Kuwaiti Dinar, including managing interest rates, inflation and foreign currency reserves. This is something that Iraq is also managing with the Iraqi dinar.
In conclusion, Kuwait revalued its currency in 1991 after the country’s liberation from Iraqi occupation. The revaluation significantly increased the value of the Kuwaiti Dinar from pre-invasion rate of approximately 1 KWD to 0.30 USD to 1 Kuwaiti Dinar (KWD) to 3.47 USD and restored confidence in the economy. Since then, Kuwait has maintained a stable exchange rate with the US Dollar, and there have been no subsequent revaluations. The Kuwaiti Dinar continues to be recognized as a strong currency, reflecting the nation’s economic stability and prosperity.
Jul 19, 2013
When Iraq invaded Kuwait in August of 1990, the value of the Kuwaiti dinar dropped to about 5 cents. In other words, it took 20 Kuwaiti dinars to buy one dollar.
In February of 1991 Iraq was expelled from Kuwait, and a month later, the banks revalued their currency to $3.47, the highest valued currency in the world. When this occurred, the New York Times reported the event on March 25, 1991.
It still has no water and little electricity or food, but Kuwait revived its banking system today, introducing a new currency. Banks reopened for the first time since Iraqi occupation forces shut them down in December 1990. Thousands of people lined up to exchange their old Kuwaiti dinars for crisp new ones and to withdraw a limited amount of money…. All other old dinars can be exchanged for new ones on a one-to-one rate until May 7 1991, when the old dinars become invalid. The new official exchange rate is 3.47 American dollars for one new Kuwaiti dinar.
At the same time, the UN put Iraq under trade sanctions, crashing the value of the Iraqi dinar (IQD) from $3.22 to about 4000 to the dollar. Their currency could only be spent in Iraq itself, and people had to carry around wads of 25,000 dinar notes to buy groceries. Then in 2003 coalition forces invaded Iraq and overthrew Saddam Hussein. By 2004 we gave them a new currency without Saddam’s picture on it. The value soon doubled and went up to 2000 to the dollar.
A few years ago the Central Bank of Iraq managed to stabilize the value at 1166 per dollar (under Dr Shabibi governor of the Central Bank). On June 27, 2013 the UN partly removed Iraq from Chapter VII sanctions, allowing Iraq to regain control of close to $80 Billion in frozen funds that had been sitting in western banks since 1990. This also allowed Iraq to be reinstated on the world’s banking network, as soon as they are ready.
But the key to this note is to recognize in this article the phrase “as soon as they are ready”. What does this mean? When will Iraq be ready to be reinstated on the world’s banking network? Criteria for this event keeps changing as US administrations change. Is getting out of Un Sanctions the criteria, as the article alludes to? Then why has the Iraqi not yet been reinstated? As investors, we witness the irony of this situation as the tension between the US and Iran continues to try to gain control over Iraq and its riches. The Iraqi monetary system is being manipulated. Those who control the money are reaping billions off the manipulation. When will this end and they finally let Iraq be the sovereign and free nation that was supposed to happen for the purpose of the 2003 war? At the same time many expect to see the IQD revalued at or near its former position as with the Kuwaiti dinar in 1991.
As of 2024, there have been six series of the Kuwaiti dinar printed. On March 18, 1975, the Kuwaiti dinar was pegged to a weighted currency basket. However, from Jan 5, 2003 to May 20, 2007, the pegging was switched to 1 KWD = 3.53 USD. From June 16, 2007, it was re-pegged to a basket of currencies and was worth about $3.28. The Kuwaiti dinar is the world’s most valuable currency unit. During the global financial crisis that began in 2008, Kuwait took several measures to protect its economy and currency value. These included injecting capital into banks, guaranteeing deposits and implementing measures to mitigate the impact of the crisis.
Kuwait’s high foreign reserves and stable oil prices at the time also helped shield its economy and currency from the worst effects of the crisis.
Why is the Kuwaiti dinar so valuable today? Can Iraq follow?
Before the discovery of oil, Kuwait’s economy relied on traditional activities such as fishing, pearling and trading. The discovery of oil in 1938 transformed the economy, leading to rapid development. The abundant oil resources have played a significant role in strengthening the economy and the value of the Kuwaiti dinar.
Several key factors contribute to the values of the dinar: Kuwaiti vs Iraq
1.Kuwait has a strong and stable economy, primarily due to its vast oil reserves and efficient resource management. Iraq today also has a strong and vibrant economy producing nearly 2/3 more oil than in 1991 when it has a currency exchange rate of around $3.22. For the first time in decades Iraq is now exporting agricultural products and has established some manufacturing for export.
2.The government of Kuwait has implemented wise financial policies. The Central Bank of Iraq has also implemented a series of pillars of financial reforms including for banking, insurance and even its own Iraqi stock market (ISX) to meet modern banking practices and international standards.
3.Additionally, the fixed exchange rate of the Kuwaiti dinar, pegged to a basket of international currencies, helps maintain its value despite fluctuations in the global market. The goal in the near future is to take the Iraqi dinar off the sole peg to the US dollar and also re-peg it to a basket of international currencies.
4.The Central Bank of Kuwait (CBK) as well as the Central Bank of Iraq (CBI) regulates currency supply to align with the country’s economic needs, further supporting its value,” said a senior employee at a local bank.
5.The value of the Kuwaiti dinar also depends on oil prices, as Kuwait is a major oil exporter. Changes in global oil prices directly impact the Kuwaiti dinar as its does the Iraqi dinar and can lead to fluctuations in its value. Government measures and regulations by the Central Banks play a crucial role in maintaining the currency’s value.
As of 2023, the Kuwaiti dinar today remains the world’s most valuable currency, with an exchange rate of 1 KWD = 3.25 USD. Is this all just political?
So, I have to ask you this- Why is the Iraqi dinar still 1/6 of a penny USD while the Kuwaiti dinar is = 3.25 USD?
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