The Kuwaiti Dinar (KWD) is the national currency of the State of Kuwait. The name ‘dinar’ derives from the Roman denarius. The KWD is subdivided into 1000 fils, which is a coin used in many Arab countries.
Kuwait is a small nation located between Iraq and Saudi Arabia on the Persian Gulf. Its economy is heavily reliant on oil, making it one of the wealthiest nations globally in terms of GDP per capita.
Key Takeaways
- The Kuwaiti Dinar (KWD) is the national currency of the State of Kuwait and, as of 2023, one of the most valuable currencies on Earth.
- The currency fluctuates in a relatively narrow range and is pegged to an undisclosed basket of currencies.
- Kuwait’s economy is heavily reliant on oil, ranking it among the wealthiest nations worldwide.
- Since its official release in 1961, the KWD has undergone six different versions.
- As of December 2023, one Kuwaiti Dinar is approximately equivalent to $3.25 U.S. dollars.
Understanding the Kuwaiti Dinar
The introduction of the Kuwaiti Dinar (KWD) in 1961 replaced the Gulf rupee. The Gulf rupee was a currency pegged at parity with the Indian rupee and issued by the Indian government for use outside of India, particularly in the Persian Gulf region. Like the Indian rupee, the Gulf rupee was pegged to the British pound sterling (GBP).
In 1961, Kuwait gained independence from the United Kingdom, dissolving treaties established after the Ottoman Empire’s defeat. The Kuwaiti Currency Law established the Kuwaiti Currency Board, later transformed into the Central Bank of Kuwait, to create a Kuwaiti currency. The Central Bank of Kuwait introduced the Kuwaiti Dinar as a replacement for the Gulf rupee. Both currencies circulated until 1966 when the devaluation of the rupee led to its cessation.
From 1975 to 2003, the Kuwaiti Dinar was pegged to a weighted currency basket determined by the Central Bank of Kuwait. In 2003, the KWD was pegged to the U.S. dollar at 0.29963 dinars to the dollar. This valuation continued until 2007 when it was re-pegged to an undisclosed basket of currencies.
As of December 2023, one Kuwaiti Dinar is valued at approximately USD 3.25, making it one of the world’s most valuable currencies.
Kuwait boasts a petroleum-based economy, with 90% of government revenue derived from the oil industry. The nation is tax-free and ranks among the countries with the lowest unemployment rates globally.
The Kuwait Investment Authority (KIA) is the world’s oldest sovereign wealth fund, and the country’s investment industry manages more assets than any other member of the Gulf Cooperative Council (GCC), a regional economic and political union.
Issuance of the Kuwaiti Dinar
Since the first series of the Kuwaiti Dinar banknotes in 1961, six official issues have been released, along with two commemorative sets.
The third series, released in 1980 to commemorate Emir Jaber al-Ahmad al-Jaber al-Sabah’s accession, remained in use until the 1990 invasion of Kuwait by Iraq. The invading Iraqi forces replaced the Kuwaiti Dinar with the Iraqi dinar as the official currency.
$136.8 Billion
The GDP of Kuwait in 2021, which increased to $184.56 billion in 2022.
Upon Kuwait’s liberation, the stolen Kuwaiti Dinar banknotes were invalidated, and the fourth issue of the currency was introduced in 1991.
The 1994 series incorporated enhanced security features, and in 2014, the sixth series was introduced with bills textured for easy identification by the blind and vision-impaired.
Kuwaiti Dinar Exchange Rate
Between December 2016 and December 2021, the Kuwaiti Dinar fluctuated between $3.17 and $3.33, requiring between $3.17 and $3.33 U.S. dollars to purchase one Kuwaiti Dinar. The upper spectrum ($3.33) indicates the Kuwaiti Dinar appreciated, or the U.S. dollar depreciated relative to the Dinar.
Due to its limited volatility and global trade, the Kuwaiti Dinar is not typically used as a speculative trading instrument. Speculative traders usually avoid this currency unless anticipating significant fundamental shifts.
How Is Kuwaiti Currency Pegged?
The Kuwaiti currency is pegged to an undisclosed basket of currencies, presumed to be heavily weighted towards the U.S. dollar.
Why Is the Kuwaiti Dinar So Valuable?
The KWD is highly valued due to high demand. Kuwait’s well-managed, stable, oil-focused economy drives this demand, positioning the KWD among the world’s most valuable currencies.
Is the Kuwaiti Currency More Valuable Than the U.S. Dollar?
Indeed, Kuwait’s currency holds more value than the U.S. dollar, primarily due to high demand driven by Kuwait’s status as a leading oil producer. Nevertheless, the U.S. dollar enjoys broader global acceptance as the world’s reserve currency.
Related Terms: Gulf rupee, British pound sterling, U.S. dollar, currency basket, devaluation.
References
- Howard M. Berlin. “World Monetary Units: An Historical Dictionary, Country by Country”, Pages 89-90. McFarland & Company, Inc., 2006.
- The CIA World Factbook. “Kuwait: Economy”.
- The World Bank. “GDP per Capita (Current US$) - Kuwait, World”.
- Xe. “1 KWD to USD - Convert Kuwaiti Dinars to US Dollars”.
- U.S. Department of State. Office of the Historian. “Kuwait”.
- Central Bank of Kuwait. “Mission & Objectives”.
- Kuwait Times. “History of Kuwaiti Dinar and Why It Is The Most Valuable”.
- Central Bank of Kuwait. “Exchange Rate Policy: Overview”.
- Forbes. “Top 10 Strongest Currencies In The World In 2023”.
- PwC. “Kuwait: Overview”.
- The World Bank. “Unemployment, Total (% of Total Labor Force) (National Estimate) - Kuwait, World”.
- PwC. “Kuwait: Individual - Taxes on Personal Income”.
- International Forum of Sovereign Wealth Funds. “Kuwait Investment Authority”.
- The World Bank. “The World Bank in the Gulf Cooperation Council”.
- Embassy of the State of Kuwait, Azerbaijan-Baku. “Currency of Kuwait”.
- The World Bank. “GDP (Current US$) - Kuwait”.
- Xe. “Kuwait Dinar to U.S. Dollar Exchange Rate Chart”. Select 10Y View.
- Council on Foreign Relations. “The Dollar: The World’s Reserve Currency”.
