Paper currency first started making an appearance in this land in the 1920s. Although used to handwritten promissory notes – pieces of paper indicating a value, signed and sealed by tribal rulers – local people viewed printed notes with great suspicion.
For a long time, they simply refused to accept paper money. Only trusting what they could hold, weigh or measure in their hands during negotiations, the Bedouins believed that nothing could replace precious metals or pearls as currency. Their deep distrust was also compounded by the fact that paper did not fare as well as metal in our arid climate.
A 25 riyal Mona Lisa gold coin released by the ‘Emirate of Sharjah' in 1969
They used coins instead, and traders and merchants operating in the local souqs in the 1950s and 1960s had to carry various kinds. “The currency in the region was composed of ‘loan coins’ and it was a realm of ‘true currencies’ – coins circulated for whatever was their real metallic worth,” explains Shailendra Bhandare, Senior Assistant Keeper at the Ashmolean, the University of Oxford’s museum of art and archaeology.
“Thereby, there is room to believe that in the absence of a national currency, and with monetary exchange restricted to coastal trading regions, a melange of silver coins was in circulation,” he adds. It is only when carrying metal coins became extremely impractical that this society moved to notes, making it one of the last in the modern world to adopt paper money.
Fujairah honoured many global events through its commemorative coins
Although the exclusive usage of coinage slowly eased out, the glut of coins and notes used locally kept changing name and form until it was nationalised after the country’s unification. “In the souks of Dubai, there were silver ‘dollars’ of countries like Spain and China, the ubiquitous Maria Theresa dollar or ‘thaler’ from Austria, rupees from India, and tomans, kraans and small silver from Iran,” says Bhandare. “These would have formed the bulk of circulating currency, but it was the Indian rupee that was the most popular by far.” In local parlance, the rupee was referred to as ‘rubiya’.
‘The Government of Ajman’ marked Lenin’s birth centenary in 1970 with special coins
This story of dramatically changing currency – which is now narrated by historians, numismatists and bankers – serves up poignant portions of the past through its impact, influence and importance.
At Dubai-based Numisbing, the Middle East’s only professional curators of currency, co-founder Steve Desouza points out different editions and denominations of golden pounds, silver riyals, red rupees, Gulf rupees, Qatar-Dubai riyals and Bahraini dinars that were in use in the country until unification. He then moves on to another section at the museum which showcases commemorative gold and silver coins issued by the then independent emirates of Sharjah, Fujairah, Ras Al Khaimah, Ajman and Umm Al Quwain.
These ceremonial coins were minted to honour global events and figures as wide-ranging as the Apollo landing, Rome’s centenary, Mona Lisa, and Pope Paul VI’s visits around the world.
The ‘State of Fujairah’ issued two coins in 1970 to mark the Pope’s global visits
Perhaps the most poignant note is his vivid memory of living in Dubai as a young child. “In the late 1960s, my father got paid in these red rupees for his managerial job at Dubai port. His monthly salary was 14 red rupees, and most of us residents never had the good fortune to see such a large amount,” he says, pointing to a note with the hefty denomination of 1,000.
Desouza says although the history of the UAE’s currency is chequered and there is still much debate on many aspects, some facts are now universally accepted. “Indian buyers refused to accept gold for the pearls they came to purchase – because the value of pearls fluctuated greatly – and the Indian rupee became an accepted form of currency in Dubai.”
The ‘Red Rupee’ was the most popular currency used locally until the mid-1950s
The President of the International Bank Note Society’s Dubai chapter, Ramkumar, also the founder of Numisbing, reveals other aspects of this chronicle. “Before the story of oil, there was no currency system here, and it made sense to use the money of the largest and nearest nation, which happened to be India – then under British rule. Until the mid-1950s, all the currency notes that were used in India were also used in the Trucial States.”
When traders started smuggling copious quantities of gold from the Trucial states into India, they were taking advantage of the fact that gold was much cheaper here, and in 1957, the British authorities introduced the external or Gulf rupees to put a stop to this, he explains.
While the new Gulf rupee notes were identical in design to Indian editions, their colours were radically different, and they were further distinguished by a special serial number prefix of Z. If Indians were interested in trading in the UAE during this period, they would have to first exchange their Indian rupees at the office of issue in Bombay, and the exchange rate, Ramkumar says, was settled at one-for-one.
(L to R) Steve Desouza and Ramkumar, co-founders of Dubai’s Numisbing, the only professional curators of currency in the Middle East
“The Gulf rupees were in circulation for about nine years. By then oil had been discovered in the Trucial States and India devalued its currency in 1966, and things changed,” he points out.
As soon as the Gulf rupee was devalued, the Trucial States adopted the Saudi riyal from June to September 1966, as a transitional measure, after which new currencies came into circulation, largely based on political alliances. Between 1966 and 1973, Abu Dhabi used the Bahraini dinar, while Dubai and the rest of the emirates used the Qatari-Dubai riyal.
The next part of this fascinating account is narrated by Hammad Naqvi (right), Managing Director, FX Derivatives & Investments at Mashreq’s Treasury and Capital Markets.
“In the very early days of the bank, from 1967 onwards, our staff used to handle the several types of currency in use at the time. After the UAE was formed in 1971, the UAE Currency Board was established in 1973 – the stalwart institution we now know as the Central Bank of the UAE. In 1972, the UAE also became a member of the International Monetary Fund.
Naqvi also explains the role played by the Currency Board, “The only mandate of the Board was to issue a new currency for the country to replace all others that were in use, and the UAE dirham was officially put into circulation on May 19, 1973,” he explains.
The Bahraini dinar and the Qatari-Dubai riyal were replaced within weeks, at the rate of one dirham for one riyal and 10 dirhams for one dinar. According to the Central Bank of the UAE, a total of 12.9 million dinars and 131 million riyals were replaced by 260 million dirhams in circulation.
The UAE Currency Board established the ‘UAE dirham’ in May 1973, and later became the Central Bank of the UAE
Along with a history lesson, Naqvi also offers a peek into the future: “It is very fitting that the central banks of the UAE and India signed an agreement earlier this year that will enable businesses on both sides to bypass the US dollar or any other foreign currency and trade directly in UAE dirhams and Indian rupees.
“This harkens back to the long years of trade and commerce the two countries have enjoyed, and the era where the Gulf rupee played a prominent role in this region. Quite simply put, this will equate to more competitive trade and larger savings for both business communities,” he says.
“There are many other changes regarding currencies underway, led by cross-border mobility and digitalisation. Soon, we may even emerge as one of the world’s first truly cashless societies,” he adds.
“At Mashreq, we are fortunate to have been writing on the same pages of history as the UAE. As bank and country grew together, we established laws and regulations which have now become cornerstones of trade and business. We now join hands to define a very bright future.”