Bahriani Dinar: Bahrain's Official Currency, Explained

What Is the Bahraini Dinar (BHD)?

The Bahraini dinar (BHD) is the official currency of Bahrain and has been since 1965 when it replaced the Gulf rupee. Bahrain is a wealthy island nation in the Persian Gulf next to Saudi Arabia, whose primary source of income is from the oil and gas industry. The Bahraini dinar is the second-highest valued currency in the world after the Kuwaiti dinar (KWD).

The BHD is pegged to the U.S. dollar at a rate of 2.659:1.

Understanding the Bahraini Dinar (BHD)

The BHD (Bahraini dinar) is made up of 1,000 fils and often uses the symbol BD when trading. It is a highly valued currency and is officially pegged to the U.S. dollar at a rate of 1 BD = 2.659 USD. The name dinar comes from the Roman denarius, which was the original standard silver coin used as currency during Roman times from 211 BC for about five hundred years.

Before 1965, Bahrain used the Persian Gulf rupee as its currency. Bahraini dinars began circulation in 1965 and replaced the Persian Gulf rupee at a conversion rate of one dinar to 10 rupees. Until 1973, the Bahrain Currency Board issued banknotes. After 1973, this responsibility fell under the control of the Bahrain Monetary Agency.

In 1980, the dinar began pegging to the IMF’s Special Drawing Rights (SDR), with a fixed rate of 0.376 dinars to $1 USD. There has been volatility, mainly due to the instability in the region, but the peg has been maintained. By 2006, the Bahrain Agency transitioned and was renamed the official Central Bank of Bahrain (CBB). The CBB oversees both conventional and Islamic banks. It also has oversight of insurance, investment firms, brokers, and other financial institutions.

The Bahrain dinar banknotes have denominations of 0.5, 1, 5, 10, and 20 dinars. The country also has coins valued at 5, 10, 25, 50, 100, and 500 fils. The Central Bank of Bahrain manages the currency. Beginning in 2016, the Central Bank began the circulation of notes with enhanced security features. The new notes also have raised lines to assist the visually impaired.

Bahrain's Economy

Throughout the 1980s and '90s, the country of Bahrain was becoming more economically stable, after having implemented changes at a developmental level. By 2008, the Central Bank of Bahrain launched a new group of banknotes, which were technically its fourth official series of notes. This new issue honored both the bright future of Bahrain and reflected upon its past heritage.

Due to the pandemic in 2020, Bahrain will need to rely on financial support in 2021, and its GDP is predicted to grow by 3.3% in the year, with expectations to remain at the same level in the medium term.

Bahrain is a kingdom and has been ruled by the same family since the 18th century. It achieved independence from Britain in 1971 and became an official monarchy in 2002. As with many countries in the region, Bahrain's economy is primarily supported by oil, with 85% of the government budget coming from oil revenues. As such, Bahrain's economy is extremely sensitive to shifts in oil prices. Bahrain is also a strong financial center with many banks and financial institutions.

In 2020, Bahrain's largest exports were refined petroleum ($3.19 billion), raw aluminum ($2.36 billion), aluminum wire ($338 million), iron ore ($315 million), and asphalt ($214 million). Its biggest export partners were the United Arab Emirates (UAE), Saudi Arabia, Malaysia, United States, and Kuwait.