The dinar is the official currency of Kuwait. It is a decimal currency subdivided into 1000 fils. Because the Kuwaiti dinar has the highest value of any currency in the world, coins in denominations as low as 5 fils remain in circulation, and banknotes are printed in denominations starting at 250 fils (1/4 dinar). Kuwait introduced the dinar in 1961, and the Central Bank of Kuwait has issued the currency since 1970.
The first currency issued by Kuwait was on the orders of the Sheik Abdullah bin Sabah bin Jaber Al-Sabah, the fifth Sheik of the Al-Sabah dynasty. The coins of this currency were hand-made and only circulated for a few months before being withdrawn since they were not backed by any precious metals. Instead, the nation used the Indian rupee, which was backed by the Bank of England.
In 1961, all Indian rupee notes and coins were withdrawn from circulation and replaced by the dinar at a rate of 1 dinar: 13.33 rupees. Seven years later, Law No. 32 was passed, establishing the Central Bank of Kuwait, which began operating as of April 1969. The primary objectives of the bank are to issue currency, ensure the stability of the currency, direct credit policy, supervise the banking system and to act as a banker to the Kuwaiti government.
The first banknotes issued by the Central Bank of Kuwait began to circulate in 1970. When Iraq invaded Kuwait in 1990, enormous quantities of banknotes were stolen, so when the country was liberated in 1991, a new series of notes was introduced to prevent Iraqis from spending those that were stolen. Beginning in 2003, the Kuwaiti dinar was pegged to the U.S. dollar at a rate of 1 KWD: 3.33745 USD with a floating margin of plus/minus 3.5 percent, but in 2007, the peg to the dollar ended in favour of a peg to a basket of relevant currencies.
Kuwait is small but extremely wealthy nation due its oil reserves, which make up 10 percent of the world’s total. While oil only accounts for 50 percent of the country’s GDP, it makes up 95 percent of revenue from exports and 75 percent of the Kuwaiti government’s income. Because of the country’s dry, arid climate, agriculture is negligent, and food makes up the bulk of imported goods. In addition, Kuwait only has enough freshwater to support 25 percent of its population.