In the past, the United Arab Emirates was unsuitable for the development of agriculture, a desert territory in which poor tribes lived. Oil wells have turned them into an economically prosperous state with cutting edge infrastructure.
The currency of this Arab country is called the dirham. This word came from ancient times and was used to denote the currency in the days of the first caliphs. It is worth noting that this name is also used in other Arabic-speaking countries, for example, there is a Moroccan dirham. The UAE currency is stable due to its powerful economy, which is based on huge oil reserves. The exchange rate of the national currency has not changed much since the country's independence in 1971.
History of the founding of the state
In the second half of the first millennium AD, small principalities located on the southern coast of the Persian Gulf became part of the Arab Caliphate and converted to Islam. In subsequent centuries, as the central authority in the empire weakened, these territories received actual autonomy. In the era of the great geographical discoveries of the Principality of the Persian Gulf, to some extent came under the influence of such large European colonial powers as Portugal and Great Britain. In the 19th century, the United Kingdom established full control of the Arab states in this territory. The principalities of the Persian Gulf were under the British protectorate until 1968. Independence was proclaimed after the withdrawal of British troops. In 1971, the Arab monarchs entered into an agreement on the creation of a federal state. The main principle of coexistence was the right of each emirate to dispose of oil reserves on its territory.
Etymology
The name of the modern currency of the UAE comes from the ancient Greek word "drachma" meaning "a handful". The Arabic Dirham is a distorted pronunciation of the original term. In the ancient world, silver coin was called drachma, as well as the unit of measure used to weigh precious metals, equal to 4.36 grams.
Use in the Middle Ages
In the Arab caliphate, the dirham was an exact analogue of the ancient Greek means of payment. It was a silver coin weighing about 4 grams. In accordance with Islamic traditions, there were no images on the currency. On the coins of the Arab caliphate there were inscriptions containing quotes from the Koran and the names of the rulers. Dirham was distributed throughout the vast territory of the Muslim empire. The weight and shape of the coins, as well as the quality of the metal varied in different regions. In the Middle Ages, dirham was minted in all major cities located on the territory of the Great Silk Road. As a universal means of settlement in international trade, Arab silver coins penetrated in large numbers into European countries. Archaeological expeditions have repeatedly discovered ancient dirhams even in Russia.
Introduction to circulation in the UAE
During the period of the British protectorate, the main monetary unit of the emirates of the Persian Gulf was the Indian rupee. After World War II, the currency reform was carried out at the sunset of the era of colonialism. The central bank of already independent India issued in 1959 a separate type of monetary unit - the rupee of the Persian Gulf. The sharp drop in the exchange rate that followed several years later caused the Arab principalities to abandon their first currency and officially introduce the Bahraini dinar and the realities of Qatar and Saudi Arabia. After the formation of the federal state, a national monetary unit, the UAE dirham, was created. Other currencies stopped circulation on the territory of the principalities. The proclamation of an independent state and the issuance of its own monetary unit coincided with the oil boom, which provided substantial support to the economy of the Gulf emirates.
Dirham to the dollar. Course
The Central Bank of the UAE adheres to the concept of artificial fixation of the national means of payment. Such a currency regime is typical for relatively small Arab countries with huge hydrocarbon reserves. The dirham to US dollar exchange rate was set by the directive of the Central Bank at the time the official circulation of the national currency began. The UAE currency, unlike many others, has no market quotes and is not subject to fluctuations. In 1973, the dirham against the US dollar was fixed at 3.94. Over the next decades, this ratio has not undergone any major changes. Currently, the dirham to dollar exchange rate is 3.67.
For the sake of objectivity, it should be noted that the hardness and stability of the UAE currency is conditional. The dirham fully reflects the dynamics of the purchasing power of the US dollar. Strictly speaking, it is a derivative of the American currency. How to determine how much 1 dirham in Russian rubles costs? The answer to this question is determined by the exchange rate of the Russian currency against the US dollar. The value of 1 dirham in rubles exactly repeats the market fluctuations of the currency of the Russian Federation. In the period before the serious weakening of the Russian currency at the end of 2014, the value of this cross rate was approximately 8.70. Now for 1 dirham they give 15-16 rubles.
Currency policy
Responsibility for financial decision-making lies with the UAE Central Bank. This government agency insists on maintaining a tight peg of the dirham to the US dollar. A fixed rate excludes inflation targeting practices in the country. The Central Bank of the UAE is actually in a position of a hostage to the monetary policy of the US Federal Reserve Service. Recently, the currency regime in the United Arab Emirates has often been the subject of controversy. Proponents of the transition to a floating rate indicate that current policies create opportunities for speculative attacks.
There is an intermediate option - linking the national currency to a basket of several of the most liquid world currencies. However, today the position of the UAE financial authorities remains unchanged.
Banknotes
The most popular are denominations of 5, 10, 20, 50 and 100 dirhams. Banknotes of 500 and 1,000 denominations are less common. The Government of the United Arab Emirates does not follow the widespread tradition in the world of placing portraits of prominent citizens and national heroes on banknotes. On UAE banknotes, you can see only images of the country's attractions. The front side contains texts in Arabic, the reverse - in English. Early series of paper money included a 1 dirham banknote. Now, for practical reasons, it has been withdrawn from circulation and replaced by a coin.
The smallest denomination has a denomination of 5 dirhams. The front side shows the famous market of the city of Sharjah, on the back - a view of the large port in Khaur Fakkan on the Indian Ocean. A banknote of 10 dirhams is decorated with a drawing of a traditional Arabian blade. On the obverse of a denomination of 20 dirhams is a yacht club located in the capital of the UAE. On the back is an Arabic sailing ship made from teak. On the obverse of the 50 dirham banknote is a desert antelope. On the back is a fortress in the city of Al Ain. A banknote of 100 dirhams is decorated with views of the capital of the country. On it you can admire the images of the international shopping center and the ancient fort in Dubai.
Coins
1 dirham is divided into 100 fils. From Arabic, this word translates as "money." Almost all coins in the UAE are nominated in fils. One part is made of bronze, the other is made of an alloy of copper and nickel. Denomination of the largest coin is 1 dirham. It depicts a round Arab vessel. The nominal value of smaller metal money is 1, 5, 10, 25 and 50 fils. The last coin attracts attention with its unusual heptagonal shape.