What Is the KWD (Kuwaiti Dinar)?
KWD is the foreign exchange (FX) symbol for the Kuwaiti dinar, the currency for the Middle East nation of Kuwait and is divided into 1,000 fils. Measured against the U.S. dollar, the dinar has a higher value than any other world currency trading at an exchange rate in 2018 of approximately $3.30 per one Kuwaiti dinar. Over the past decade, the dinar had reached an exchange rate of as much as $3.67 per one dinar.
The dinar is a controlled currency, so it does not freely float against other global currencies by taking its price from supply and demand. The Central Bank of Kuwait enforces this controlled currency policy to maintain the stability of the dinar’s value and decrease the risk of inflation.
Understanding the Kuwaiti Dinar
The dinar was introduced in Kuwait in 1961 to replace the Gulf rupee, which had circulated through the Persian Gulf region when Kuwait had been a British protectorate and subject to British regulations on internal and economic affairs. In 1961 the State of Kuwait became an independent country and established its currency. In 1990, however, the Iraqi dinar (IQD) replaced the Kuwaiti dinar after Iraq invaded and occupied Kuwait. During that occupation, the theft of much of Kuwait’s currency happened. When Kuwait regained its independence in 1991, it demonetized its previous currency and introduced a new Kuwaiti dinar with new coins and banknotes.
KWD is Managed for Both Stability and Growth
Kuwait’s monetary policy emphasizes stability to mitigate the impact of inflation in a way that enhances economic progress and growth of national income. Although growth had been rapid over the past 20 years, the economy had contracted since 2013 when crude oil prices declined. The contraction was due, to some extent, on lower crude oil prices which the nation has relied on as a major export.
To achieve its goals for the Kuwaiti dinar (KWD) the central bank’s policies include pegging the dinar to a weighted basket of other currencies which represent Kuwait’s principal trading and financial partners. According to World Bank data, gross national income per capita (measured in U.S. dollars) more than tripled from $14,200 in 1988 to $51,990 in 2013, yet fell to $34,890 by 2016.
Kuwait’s gross domestic product (GDP), as measured in U.S. dollars, grew from less than $20 billion after the country was liberated from Iraq in 1991 to reach $174 billion by 2014. By 2016, however, the gross domestic product shrank to $110 billion. The World Bank estimates that growth will return in 2019 and 2020 with a projected annual growth rate of 3.5 percent as the country’s government and central bank create initiatives to diversify its economy to limit its reliance on oil exports.