Historical Sketch

In the late 17th century, the Omani of the Arab Peninsula conquered parts of the East African coast and established a maritime empire. In the mid-19th century, the capital and center of the state was transferred to the island of Zanzibar. Briefly afterwards, in 1865, the empire broke apart in a dynastical conflict in the ruling dynasty, and the African and Arab parts formed separate states. The Sultanate of Muscat comprised the coastal areas along the Arab Peninsula while the interior was divided into the Imamate of Oman, which maintained a large autonomy until 1912, and the Dhofar Governorate, dissolved in 1959. The traditional name of Muscat and Oman remained in use until 1970, when a dynastical coup d’état triggered a thorough reform and modernization of the country. This also led to abolition of the de facto British protectorate that had existed since 1892 and the full independence of the Sultanate of Oman in 1971.

Monetary History Overview

Accounting was done in the Omani state using a theoretical unit "Muhammadi", which may trace back to a medieval Indian or Iranian silver coin but had no real correspondence any longer at the time of the sultanate. During the 18th century, the silver Maria Theresa Thaler flew into the coastal regions through long-distance trade. Indian silver and copper coins entered the market in the same way. In the late 19th century, Oman began issuing subsidiary copper coins in Indian currency. In the hinterland, especially in the province of Dhofar with the sultan's residence in Salalah, copper coins were not popular and the Indian coinage, in general, was not common. Thus, another set of subsidiary coinage in the standard of the Maria Theresia Thaler was issued in the late 1930s. In 1959, the Indian Central Bank decided to issue separate banknotes for the states on the Persian Gulf in order to have better control over the money supply. This created a special form of the Indian currency, the so-called "Gulf Rupee". The banknotes were not legal tender in Oman but nevertheless flew in from the neighbouring countries. When India devalued the Rupee in 1966, the Gulf Rupee was demonetized everywhere in the region. The Omani government, however, decreed that the banknotes remained valued at the old parity, one third above market, which led to a massive inflow. In 1970, the sultan was deposed by his son, who then initiated a thorough modernization of the state. This included a remediation of the chaotic monetary situation. In May 1970, the Muscat Monetary Authority, two years later renamed Omani Currency Board, began operations, and the Omani Riyal became the national currency (initially called Sa'idi Riyal after the ruling dynasty). It was at par with the Pound Sterling, and the Gulf Rupee was exchanged at the pre-1966 value and withdrawn within a few days. The Maria Theresia Thalers were also redeemed although the currency law did not call for it. When Britain floated the Sterling in 1972, the Riyal repegged to the US Dollar, which has been unchanged since the 10% devaluation of 1986.

Oman joined the International Monetary Fund (IMF) on 23.12.1971.

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