By Tom Cleveland
Our nation’s currency is ever-present in our daily lives, but how often do we wonder how our modern day coinage came in to being? The history of a nation’s currency is often as interesting as its general history, reflecting similar periods of domination from outside entities that eventually yield to national independence.
In Oman, our legal tender is the Rial, which is also subdivied into 1,000 baisa. Spanish, Austrian, and British empires have played small roles along the way, but the Rial has been the official currency since 1970.
The history of the Rial begins as far back as 400 years ago, back during the era of exploration. At that time, the prevailing international currency was the Spanish Dollar, more popularly known as 'pieces of eight'. This unique phrase evolved because the dollar coin was worth eight 'reales' and could be physically cut into eight pieces, or 'bits', to make change. These silver coins were minted in the New World and quickly became legal tender across the globe.
As the British Empire expanded their influence in the 1800s, they reversed an earlier policy that replaced local tender for the Pound Sterling. For this reason the Indian Rupee remained prominent in its homeland, and, as Indian laborers immigrated to other shores along the Indian Ocean, the Rupee gained prominence along the east coast of and across the horn of Africa, through Aden and Muscat in Southern Arabia and Eastern Arabia, and along the coast of the Arabian Gulf, extending even as far inland as Mesopotamia.
The Rupee facilitated trade along these shorelines, but in the interior of Oman, the Maria Theresa Thaler prevailed, another silver coin, but of Austrian origin. This coin was referred to locally as the 'rial' and was worth roughly one quarter of the Rupee’s value. Before 1940, both currencies co-existed in Oman, but new coins were minted thereafter that were denominated in 'baisa' with 200 baisa equivalent to one 'rial'. In 1970, a new rial Saidi coin was created, but replaced in 1973 by the rial Omani. This 'Rial' was equal in value to £1 or Rs21.
Fast forward to the present, and we have the present day Rial. From 1973, the Rial has been pegged to the U.S. Dollar, a reasonable convention since oil commodity prices are stated in dollars, as a rule. Oman’s economy is highly dependent on oil prices in the international market, and since 1986, the peg has been fixed at $2.6 to 1 Rial. Pegged currencies do not float in the global foreign exchange market. It cannot be traded in the daily forex dealings, but for those that wish to learn more about forex trading, there are many helpful websites devoted to that task, whether for standard or Islamic accounts.
Since today’s Rial is a 'pegged' currency, the Central Bank of Oman (CBO) must be ever vigilant to protect against rising inflation by employing various market tools. Inflation did hit double-digits back at the height of the recession in 2008, but it has subsided. In a recent CBO report, the bank stated, “The overall outlook for Oman remains positive in 2012 despite heightened downside risks to global recovery.” GDP growth has been in the 4-5 cent range for the past few years, but the most significant problem for unemployment.
Since the Rial is tied to the US dollar, the inflation differential between the two regions may put pressure on current exchange rates. In this case, the history of the Rial may have to change once more.