Historical Sketch

The Portuguese navigators João de Santarem and Pêro Escobar sighted the two islands independently in the 1470s. At the time the islands were uninhabited so Portuguese settlement was slow and initially focused on slave trade with the African coast. The colony uniting both islands was founded in 1753. Like everywhere in the colonial empire, Portugal restyled the colony into an overseas territory in 1951. A liberation movement was founded around the same time but unlike other Portuguese colonies in Africa, there decolonization war. After the 1974 revolution Portugal hastily cleared its colonies, São Tomé & Príncipe attained independence in 1975.

Monetary History Overview

For centuries, Portugal did not introduce a distinct monetary order in São Tomé & Príncipe, Portuguese and Spanish trade coins were imported with trade. The Portuguese accounting was formally introduced in 1859. The Portuguese National Overseas Bank began operations in 1868 and introduced paper money into the colony. From 1897 onward, the banknotes were issued in the name of the local subsidiary. In 1901, its banknotes were declared legal tender. The São Toméan Milreis was nominally identical to the Portuguese, however the convertibility of the colonial banknotes was limited. The Portuguese currency reform of 1911 was implemented in São Tomé and Principe with three years delay. The São Toméan Escudo was on par with the metropolitan currency, which could be maintained all the time, unlike it was the case for other colonial currencies. In 1953, Portugal passed a new constitution for its overseas territories which prescribed the unification of the colonial currencies (except for India). This had no effect on the São Toméan currency, except for an exchange of banknotes and coins after the colony had been renamed an overseas territory. With independence in 1975, São Tome and Principe nationalized the Overseas Bank under a new name. In July 1976, Escudo was replaced by the 1st São Toméan Dobra which became the new national currency. Initially, notes from the Overseas Bank had to be overprinted, since banknote issuance with the new denominations got delayed until end September 1977. With the introduction of the new notes, the Dobra also severed the links to the Portuguese currency and repegged to the IMF Special Drawing Rights (SDR) unit. In 1987, the inflationary pressure had become so high that the Dobra got devalued by 55% and the exchange rate floated. For the next decade value of the currency went down strongly. After 1998, when close to 99% of the Dobra's value had gone, the depreciation continued at a slower pace. In January 2010, the economical and monetary situation had stabilized to the point that the Dobra returned to a fixed anchor currency, now the European Euro as successor to the Portuguese currency. The currency stabilization was successful so that the reminder of the high inflation period could be removed. Beginning of 2018, three zeros were cut, and the 2nd São Toméan (New) Dobra became the new currency unit. The peg to the Euro has remained unchanged at the changeover.

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