Middle-east Arab News Opinion | Asharq Al-awsat

The Saudi Riyal: Origins in regional trade and tales of conquest | ASHARQ AL-AWSAT English Archive 2005 -2017
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Our national legal tender is something most of us take for granted but rarely have the slightest idea from an historical perspective as to how it originated in the first place. The history of currency can be a fascinating read for anyone that appreciates following the progress of mankind over the ages. Current origins of coinage can go back centuries, when the “Age of Discovery” led to global exploration, and merchant trade routes were transformed to tie together a burgeoning global population.

The modern era of globalization may seem unique to us today, but its roots sprang from commercial trade routes of old, laced with the occasional tale of conquest and colonization. The ancient crossroads for much of this trade development activity evolved around the Arabian Peninsula, the “fulcrum point” that joined the east with the west along with the African continent. Within this context, the modern day Saudi Riyal (“SAR”) came into being after many attempts to transition from foreign currency alternatives.

The majority of currencies on the planet have evolved from old Spanish “pieces of eight”, silver coins that were minted in the New World at mints established by Spain in Mexico and Peru. Each coin was equal to eight “reales”, a Spanish monetary unit meaning “Royal” in the native tongue, and, by the sixteenth century, it had become the international currency of trade.

The Saudi “Riyal” is actually a derivative of this ancient coin of the realm, but the path to the modern day equivalent was quite circuitous, spanning an era of conquest and national expansionism. The power shifted from Spain, transferring to both the British and Austro-Hungarian Empires, the latter most dominant under Maria Theresa’s reign in the eighteenth century. The Maria Theresa “Thaler”, another silver coin, enveloped the region for usage in trade, as well as providing silversmiths with an adequate supply for jewelry making purposes. The coin was considered to bring good luck, not only in business, but also related to childbirth since the famous monarch had given birth to sixteen children during her lifetime.

With the development of trade to the region and to Africa, the area was flooded with English pounds and shillings, Indian Rupees, various Ottoman currencies, and Austrian Thalers, often Anglicized as “Dollars”. The Thaler was in broad usage, preferred by Arabian merchants due to its silver content, but the coins did coexist with British Gold Sovereigns, creating a bimetallic monetary system across the Arab Peninsula in the 1800’s. After the The Kingdom of Nejd and Hejaz was established in 1925, banknotes were issued in Pounds, and coins were minted in “Riyals”. The Arabian National Bank set the rates of exchange as one Pound was equal to five Thalers, and one Thaler was equivalent to one Riyal.

Many attempts were made to replace the popular Thaler with the new Saudi Arabian Riyal, but to no avail as ordinary folks and traders alike refused to accept the new currency. After the unification of Saudi Arabia, its founder, Kind Abdulaziz, made another attempt by issuing paper banknotes, but the populace continued to hoard older coins of value. To this day, there are many examples of people in rural areas having collected many of these old coins, while their relatives have no idea as to their value or even their whereabouts. Today the Saudi Riyal is tied to IMF drawing rights, which effectively “pegs” its value to the U.S. Dollar.

The Riyal has now gone full circle, but stability today is based on oil exports and the significant foreign exchange reserves, over $592 billion, which they create.

* www.forextraders.com