Saudi Currency

Historical Background:

Before the capture of Riyadh by King Abdulaziz Bin Abdulrahman Alfaisal in 1319H (1902G.), political anarchy and chaos prevailed all over Arabia. Conflicting loyalties created rival and antagonistic parties engaged in tribal disputes with no common cause to bring them together. Practically, each area was an independent region on its own. Our understanding of the present state as a distinct political entity never existed at that time. These miserable conditions lead to the collapse of all economic capabilities and potentials, transforming most of the communities of that time into poor nomadic tribes depending on barter system to deal in trade and commerce. Such conditions were very much typical of the inner parts of Arabia.

Political deterioration and economic collapse disabled many of the economic resources and activities of the local entities and tribal affiliations. Poverty and bankruptcy rendered the majority of the people unable to pay the heavy tax levied by the Ottomans. Tax, as well known, was the most important source of income for the Ottoman Empire and regional representatives who ran affairs on behalf of the Ottomans in Arabia. People remained impatient to rid themselves of that cruel political order which burdened them with such obligations compelling them to shrink back into backwardness and ignorance.

The capture of Riyadh by King Abdulaziz was the beginning of the real great change in the whole area. The beginning of the Twentieth century ushered the Third Era of the blessed Saudi Reign paving the way for the dawn of a new future for Arabia. Soon the new Saudi Era began to build solid bases for prosperity, stability and permanent security in the different parts of the area. By the blessings of Allah and the efforts continuously exerted since the early days of King Abdulaziz, the Kingdom of Saudi Arabia has evolved to become, in our modern times, a seat of commerce in the Islamic and Arab worlds and a basic important element in international economy.

Since the time when he captured Riyadh and set out to unite the country under The Banner of Tawheed (Oneness of God), King Abdulaziz has always been a fascinating character. For, even under such unfavorable circumstances, poor resources and global conflicts, he managed to establish a vast country based on solid rules and regulations to protect and secure its continuity depending, first of all, on the codes of Islamic Sharia, then on his own far sight and care for the interests of his nation.

The patient gradual reforms introduced by King Abdulaziz to the poor and chaotic monetary system and his successful creation of a special independent national monetary system, reflex the wise way by which he lead his country. When King Abdulaziz took over, various foreign gold, silver and bronze currencies were commonly used side by side in Arabia, regardless whether any of these currencies belonged to an existing country or not.

After capturing Riyadh, King Abdulaziz continued his endeavors to unite the country. Temporarily, he accepted the prevailing monetary situation but still he was preoccupied by the idea of establishing a single local monetary system. Money, as he realized, constituted one of the most important pillars for the sovereignty of the State and is one of the three bases for power. Therefore, in that early stage of the process of unifying the country, and in order to control monetary conditions in the markets of the Sultanate of Najd, he thought of issuing a copper coin currency for the Sultanate of Najd to control monetary conditions in local markets.

At that time, many different foreign currencies of the Ottoman Era continued to circulate. The most important of these was the Austrian Taler, also named "Maria-Theresien-Thaler" and locally called “Alriyal Alfransi”, literally “French Riyal”. Under this name, this currency was commonly used in most of the regions of the Arabian Peninsula and even in some other Arab countries. The Austrian Taler is a big one-ounce silver bullion -coin. For its accuracy, it became a weighing unit and remained used as such until now in local traditional markets. Although parts of Arabia were under the rule of the Ottoman Empire, people greatly trusted this Austrian coin, relied on it, and refused to use any other currency, not even an Ottoman one, as the main currency in carrying out their trade dealings. Some of the Ottoman administrative officials had to ask Istanbul, the seat of the Ottoman Empire, to supply them with big quantities of the French Riyal to meet the immediate needs of their regions.

Along with this “French Riyal”, other various Ottoman gold, silver and copper coins were used. However, preference was more for silver and copper (i.e.; the copper nickel) coins due to multiplicity of their denominations.  

Most famous of the Ottoman coins was “Alriyal Al-Majidi” (named after the Ottoman Sultan Abdulmajeed), and its subdivision “Para”, the plural of which is “Parat”. The front of this coin shows the full name of the Sultan signed in Tughra style inscription and the number of the years the Sultan reigned. The back of the coin shows the date and place of minting in addition to the date of taking over by the Sultan.   

The British Sovereign was as famous as the “French Riyal”.  It was given local names such as “Jineah George (George’s Guinea) because the coin was minted during the reign of “King George V”. The coin was also known by another local name; “Jineah Abu Khiyal” (Guinea of the Horseman) because a shape of an equestrian was embossed on the back of the coin. This coin came to Arabia from India, the Crown of the British Empire. There was great demand for this coin because it was of pure gold and had a stable weight. Indian Rupees, actually British coins minted during the British occupation of India, were also used in most of the Arabian region, particularly at the shores of the Arabian Gulf and the Red Sea. The profile the King of England embossed on these coins is a proof that they were actually British money. In addition, coins from Egypt, many other countries neighboring Arabia, East Asia and Eastern India (presently Indonesia) were also used.  

In these overwhelmingly chaotic conditions, King Abdulaziz worked hard to drive through and find some way to control monetary complications of his country. The first step, prior to the year 1340H (1992G.), was to counterstamp the word (Najd) on some of the commonly used and widely circulated currencies. The word was embossed on the French Riyal, Indian Rupees and its subdivisions. Likewise, it was also counterstamped on the Ten, Twenty, Forty Barat of the Ottoman Copper (and Copper nickels) in addition to the Five Qirshes (ie; Piasters) of some of the Turkish coins. The same was also done to the Two, Five, Ten and Twenty Qirshes of some of the Egyptian coins struck during the era of Egyptian Sultanate.  

This was the first step to establish reform. By this move, King Abdulaziz wanted to inform money exchangers and dealers that only the coins marked by (Najd) were the recognized official currency of his State. It was also a clear message to interpret the reality of the political situation in the Sultanate of Najd during that period. It was a bold step seen as the first stone laid by King Abdulaziz for the Saudi monetary system benefiting of the resources available at his hand at that time.

After the unification of Najd and Hijaz in 1343H (1925G), King Abdulaziz approved the use of the French Riyal, Ottoman coins and other foreign currencies prohibited in the past by former ruler of Hijaz Region, Shareif Hussein Bin Ali. As a protective measure, King Abdulaziz again gave his orders to counterstamp the word (Al-Hijaz) on these currencies. The rarest of these, perhaps, is the British monetary unit known as the (Bronze Penny) struck during the reign of King George V of Great Britain.

Although this move allowed for the flow of foreign currencies into the country, needs of the local market were still greater. This situation pointed out the importance of securing more coins to satisfy these needs. Accordingly, King Abdulaziz ordered the mint of more copper coins. These included denominations of the Half and the Quarter of the Qirsh. The front of the coin shows full name of the King (Abdulaziz Bin Abdulrahman Alfaisal Al-Saud) written in Tughra style inscription and the date of the mint (1343H.). The back of the two denominations shows their value and the place of minting; ie; Um Al-Qura. Therefore, both the Half and Quarter of the Qirsh denominations  can be considered as the first of the Saudi monetary issues because, like any ordinary currency of any other country in the world, these coins were legal tender, used under relevant specific decrees and distinguished by specific descriptions.   

Increase demand by the market, encouraged King Abdulaziz, in that same year, to order the minting of more coins similar to former ones but with some difference in the way the name of the king was inscribed to read (Abdulaziz Bin Abdulrahman Alfaisal). At the beginning of 1344H. (1926G.), King Abdulaziz ordered the minting of more Half Qirsh coins only.  These show a better design with the same former inscriptions including value of the coin and the place and date of minting distributed uniquely on the back of the coin. The front of the coin just shows the full name of King Abdulaziz (ie; Abdulaziz Bin Abdulrahman Alfaisal Al-Saud) inscribed in monographic style without adding any of his titles. Below the King’s name appears the figure (2), an indication of the second anniversary of King Abdulaziz rule after the unification of Al-Hijaz Region with the other parts of the Kingdom. This may support the aforementioned assumption that these copper coins were the first official Saudi currency. Certainly, these are the most important and rarest coins minted in Makkah Al-Mokarramah because they point out one of the most important names given to this holy city, ie; Um Al-Qura. This particular name never appeared on any coin before this date.

After the success of King Abdulaziz in unifying Al-Hijaz Region with the other parts of his State, more reforms were gradually attempted. Thus, in 1344H (1926G), King Abdulaziz ordered the minting of new One Qirsh, Half Qirsh and Quarter Qirsh copper nickel coins . Margins of the front of the new coins show the name and the title of King Abdulaziz at that time (ie; Abdulaziz Al-Saud King of Al-Hijaz & Sultan of Najd).  The back of the coins shows the value of the piece in both alphabets and figures and the year of minting with no indication to the place of minting.

The year 1346 H., witnessed many huge monetary developments. At the beginning of that year, King Abdulaziz abolished all dealings with any foreign currency such as Ottoman, Hashemite and other coins. He ordered putting in circulation new coins bearing his aforementioned title with the year of minting appearing down the back of the piece, 1346H, which was the only difference between them and the previous One Qirsh, Half Qirsh and Quarter Qirsh copper nickel coins minted in 1344H.

In the same year, King Abdulaziz took a further action seen as the most important step of his monetary reforms. The absolutely first Silver Saudi Arabian Riyal, minted in the manner of the Majidi Riyal, was put into circulation as the principal currency of the State. To ensure and confirm wide public acceptance, this Saudi Riyal was struck in silver and in the same weight and diameter of the Majidi Riyal. This Riyal, and its Half and Quarter subdivisions, came into unique design containing words and figures struck in the center and margin of the piece. Inside a circle in the center of the front of the piece appears the full name of the King (Abdulaziz Bin Abdulrahman Al-Saud). The margins show his title (King of Al-Hijaz, Najd & Dependencies) in addition to the Emblem of the State (Two Crossed Swards inside a rectangular beside which Two Palm Trees were engraved). The center of the back of the piece shows the place & date of minting (struck in Makkah Al-Mukarramah 1346H.), whilst the value of the piece, in alphabets and figures, appears in the margin.

To enhance and support the status of this currency, and to have the edge on foreign currencies’ strong competitiveness acquired through time in ordinary day to day dealings, a Royal Decree, published in the official gazette (Um Al-Qura, issue No. (160), dated 9/1/1928), was announced stating the first steps taken to organize and regulate prevailing monetary circumstances of the country. The Royal Decree included many articles & terms to point out the country’s monetary policy at that time.  Most important relevant points are:

·         Article (1): Name of this Regulation: The Hijazi- Najdi Monetary Regulation hereinafter called (Arabian Currency).  

·         Article (2): Effective from the 1^st of Shabaan 1346H., Ottoman Riyals shall be abolished from all dealings and shall be replaced by Arabian Riyals & subdivisions.

·         Article (3): The Arabian Riyal, in size, weight and silver caliber, is equal to the Ottoman Riyal. The Half Arabian Riyal is equal to the Half Ottoman Riyal. The Quarter Arabian Riyal is equal to the Quarter Ottoman Riyal.

·         Article (4):

First: The British Sovereign is the basic standard for rates of Arabian Silver currency.

Second: A Gold Sovereign is equal to Ten Silver Arabian Riyals.

Third: A Gold Sovereign is equal to (110) Amiri Qirshes ie; (220) Qirshes darij (i.e.; in circulation).

Fourth: The Silver Arabian Riyal is equal to (11) Amiri Qirshes, ie; (22) Qirshes darij (i.e.; in circulation). 

By announcing this new monetary regulation, every one was bound to use the Saudi Riyal and stop dealings in other currencies. Consequently, in 1348H., (1930G.), it was necessary to have the Riyal and its subdivisions re-minted in all denominations and previous specifications with the exception of the date of mint (1348H) and put into circulation in conformity with exchange rate of the Hijazi-Najdi Qirshes, which were re-minted also in all denominations and previous specifications with the exception of the date of mint (1348H).

After full unification of the country, King Abdulaziz, by the Royal Decree No. (2716) dated 7/5/1345H., (22/9/1932G.), gave his order to change the name of the country from (Kingdom of Al-Hijaz, Najd & Dependencies) to (Kingdom of Saudi Arabia). In addition, it was decided to use the title of (King of the Kingdom of Saudi Arabia) instead of (King of Al-Hijaz, Najd & Dependencies). Nevertheless, the first Saudi currency bearing the new name of the country appeared in1354H. (1935G.), when the Silver Riyal, the Half Riyal and the Quarter Riyal, were put in circulation.

In comparison with the older Riyal, the new one was distinguished by its smaller size and lighter weight of (11.65) gm., ie; half of the weight of older Riyal. The new Riyal was also distinguished by higher fineness of (0.916). Thus, specifications of this new Riyal almost matched those of the Indian Rupee, the most commonly used amongst foreign currencies at that time.   

The design of the new Riyal is similar to the old one in terms of ornament, shape and distribution of inscriptions. Nevertheless, the center of front of the new Riyal shows the full name of the King (Abdulaziz Bin Abdulrahman Al-Saud) surrounded by a circle to separate inscriptions on the margins presenting the King’s new title (King of the Kingdom of Saudi Arabia) and beneath it is the Emblem of the State. However, the back of this new Riyal is identical to the back of the older one with the exception of the year of minting (1354H).  

The One Qirsh, Half Qirsh and Quarter Qirsh copper coins did not bear the new name of the State until in 1356H., (1937G.) when they were minted in the design of the older Qirsh and its subdivisions. Nevertheless, the front of the coin shows the name & title of the King (Abdulaziz Al-Saud/ King of the Kingdom of Saudi Arabia) written in the form of a circle. The back of the coin shows no change except in the year of minting (1356H.) appearing down in the lower part of the coin.

Because of accelerating economic development by the Government and increasing needs of the local market for Saudi currency, which was then considered as the principal legal tender throughout the country, for thirteen years in a row, big quantities of the Silver Riyal, and the Qirsh and their subdivisions were repeatedly minted.  Nonetheless, the original dates of minting (1354H) for the  Silver Riyal & subdivisions and (1356H) for the copper nickel Qirsh & subdivisions remained unchanged until 1367H., (1948G) when the date of minting of the Silver Riyal underwent changes as the currency was struck in different years by various minting houses in London, Mexico, Philadelphia and Bombay.  

However, all these efforts did not prevent the value of the Silver Riyal to go down from (22) to (20) Qirshs. This was because after the unification of the country and the focus on minting the Saudi Silver Riyal to meet official obligations and satisfy local demand, money-exchangers stored smaller denominations of the Copper nickel coins causing sever shortages in the One Qirsh coin and its subdivisions. To solve the problem and combat monopoly by money-exchangers, the State in 1465H., (1946G) counterstamped the figure (65) on the center of the front of all coins, minted before or after the unification of the country, which were in circulation at that time. Thus, the State managed to restore monetary balance to the markets and at the same time maintain the value of the Silver Riyal. These marked coins remained in circulation until early in the reign of King Saud Bin Abdulaziz.

In 1367H., (1948G) the One Silver Riyal, excluding subdivisions, was struck and put into circulation in its former design with the exception of the date of minting (1367H) inscribed on the back of the previous mint. This coin was re-minted in 1370H., (1951G), again excluding subdivisions. In the same year (1370H) and for the first time in the Saudi Era, the Gold Sovereign was minted. In terms of ornament and other descriptions, it came in a similar design to the Sliver Riyal. The only exception was in the date of mint and the value of the piece, which was inscribed in alphabets (One Saudi Arabian Guinea) on the upper margin of its back.  This Gold Sovereign weighed (8grams), fineness (0.91666) and diameter (22mm). These specifications made it very close to the British Sovereign.    

The Gold Sovereign was not put into circulation in the same year it was minted (1370H) compliant to an advice by Mr. Arthur N. Young, an Economic & Financial Advisor Heading an American delegation tasked with assisting in the development of the Kingdom’s financial system. This American delegation was asked to focus mainly on monetary matters beside economic matters in general. Mr. Young advised that the two and a half million pieces of Gold Sovereigns were to be kept in custody until the establishment of a competent institution capable to manage the financial affairs of the country. So, these Gold Sovereigns were held until the foundation of the Saudi Arabian Monetary Authority (SAMA) in 1372H (1952G).   

The main concern for Saudi Arabia, after putting the Silver Saudi Riyal into circulation, was to maintain its value against the British Sovereign; the most important Gold currency at that time. Nevertheless, global economic stability was deeply shaken by the sharp international political shifts witnessed at that time. Silver prices collapsed due to the Great Depression. Moreover, between 1349H- 1352 H (1931-1933G) Britain and the USA abandoned the Gold Standard causing Gold prices to go up affecting exchange rate of the Silver Saudi Riyal against the English Gold Sovereign as applied by the Najdi-Hijazi monetary system.  

As no local central monetary authority existed to control and regulate issuance of currency, coins were minted abroad and brought to the country in separate batches often in irregular periods of time. The situation aggravated when the drop in the exchange rate of the Silver Saudi Riyal created a big difference in its value as currency compared to the value of the mineral of silver in international market. This encouraged a bunch of money exchangers to smuggle huge amounts of the Silver Saudi Riyal across the borders, particularly to markets of India, which constituted a centre of attraction for smugglers. 

King Abdulaziz realized the importance of a banking system to mange the gradually growing income of the State resulting from increases in oil exports. The envisaged institution could also curb and control any economic confusion caused by sharp fluctuations in prices of gold and silver, the backbone of the national currency.  

From the very beginning, King Abdulaziz was very anxious to establish a national bank responsible for issuing Saudi currency, organizing its circulation into markets and maintaining its value. There were many offers presented to realize this project, but none of them was up to his expectations.    

Early in 1371H., (1952G) following a great confusion in exchange and payment systems, King Abdulaziz approved an American Financial Mission to Saudi Arabia, headed by Mr. Arthur N. Young, an Economic & Financial Advisor. The Mission was to provide necessary advice on financial and economic matters and assist in the development of the Kingdom’s monetary system. Based on the reports of Mr. Young and after consultations with HR Prince Saud, who later became King Saud Bin Abdulaziz, to define the suggested institution, a name was selected for the desired financial institution in addition to specifying its functions and objectives. Consequently, the two Royal Decrees No (30/4/1/1046) and (30/4/1/1047) dated 25/7/1371H (20/4/1952G) were issued ordering the creation of the Saudi Arabian Monetary Authority (SAMA), and establishing its Statute to confirm its important role in the stabilization of the value of the Saudi currency, strengthening this currency domestically and abroad, supporting the Ministry of Finance by centralizing the reservation of Government revenues, providing necessary consultation to the Government on matters related to coinage and circulation of currency, supervising commercial banking system and money exchangers dealing in foreign exchange. Under the Statute, SAMA was not allowed to give advances to Government or private parties nor to issue paper currency. The Statute included other further items as stated by the two Royal Decrees.  

The Saudi Arabian Monetary Authority (SAMA), the second oldest Central Bank in the Arab World, started its operations on14/1/1372H (4/10/1952G). The first task to be done was the completion of the Saudi Monetary System. Early in the month of Safar 1372H., the Gold Saudi Riyal was put into circulation. Exchange rate for this Riyal was defined at Gold Saudi Riyal 1 = Silver Saudi Riyals 40, ie; the equivalent of (10.90) dollars in agreement with the targeted exchange rate of the Saudi Riyals against the US Dollar (US$ 1 =  Saudi Riyal 3.70). The Saudi Arabian Monetary Authority (SAMA) exerted huge efforts to maintain this rate and exercised its full competence, in collaboration with the banking system, to attain that target.  

SAMA undertook to complete coinage of the Saudi Silver Riyals. In 1373H., (1953G)  the Saudi Silver Riyal was coined marked by the name of King Abdulaziz, a clear indication that the Kingdom of Saudi Arabia has now possessed a competent institution to issue and maintain the value of its own national currency.   

King Abdulaziz exerted extraordinary huge efforts to bring out the unique identity of his country and nation through the creation of an independent national currency as a symbol of sovereignty. The steps taken to realize this aim manifest the unparallel far sightedness, wisdom and cleverness of King Abdulaziz. He handled events and issues with patience and flexibility. The stages of the monetary reform followed closely the complicated circumstances surrounding the process of unifying country reflecting his skills in handling difficult political evolution from the beginning of his struggle in 1319H (1902G) until 1351H (1932G).

Despite the success he attained, King Abdulaziz ambitions were still much higher. He was aware that it was not realistic to continue using metal coins in the light of fast economic developments and mounting revenues of the State. Moreover, he noticed that Silver Saudi Riyals were heavy burdens for pilgrims to Makkah Al-Mokarramah during Hajj Seasons. Therefore, he took one of his most courageous decisions by which, as of 14/11/1372, H (25/7/1953G) SAMA started issuing what was known as the Pilgrims’ Receipts. The value of a Receipt was Ten Riyals. As a first batch, five million Receipts were printed in Arabic, Persian and English, Urdu, Turkish and Malayan languages. A Receipt would keep for the holder the value of Silver Saudi Riyals. This step was widely approved and accepted by pilgrims, merchants and citizens driving SAMA to re-issue it in addition to further two new denominations; the Five Riyals Pilgrims’ Receipt in 1373H (1954G) and the One Riyal Pilgrims’ Receipt in 1375H (1956G).  SAMA found out that citizens and pilgrims were willing to replace metal coins by paper notes; a clear indication of their confidence in the Government and its ability to protect its paper currency, which is far more difficult than protecting coin currencies with their highly inherent value.

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References:  

1. Saudi Arabian Monetary Authority (SAMA), Currency Issuance & Possessions of Ancient and Islamic Coins, Riyadh, Saudi Arabian Monetary Authority , 1411H.
2. Saudi Arabian Monetary Authority (SAMA), Rules & Instructions, Riyadh, Saudi Arabian Monetary Authority , 1414H.
3. Mohammed Saeed Al-Hajj, Saudi Arabian Monetary Authority (SAMA), Foundation, Progress and Achievements, Riyadh, Saudi Arabian Monetary Authority , 1419H.