Countries with the lowest currency value: The 10 cheapest currencies in the world and the reasons behind them

Around the world, many countries are facing economic crises, causing these least valuable currencies to become the cheapest in the world. Factors such as high inflation rates, political instability, lack of economic diversification, and limited foreign investment all contribute to these currencies’ low values. In this article, we will delve into the 10 weakest currencies and understand how they impact the global economy.

How to Compare the Cheapest Currencies

Before examining each country in detail, we should understand what it means for a currency to be the least valuable. The cheapest currency does not necessarily mean the country’s economy is absolutely weak, but reflects market volatility and internal factors. Comparing exchange rates of these currencies against the US dollar is a good way to gauge their strength or weakness.

Analysis of the 10 Countries with the Weakest Currencies

1. Lebanese Pound: The Weakest Currency

The Lebanese Pound (LBP), known as the “Lira,” has been in an unprecedented crisis since 1939. Historically pegged firmly to the US dollar, its stability collapsed due to prolonged economic and political crises. Lebanon defaulted on its debt in 2020, and the LBP lost over 90% of its value on the parallel market.

What caused Lebanon’s economic crisis?

Lebanon has been amid one of the worst medical crises in recent history. Since 2019, it has experienced triple-digit inflation, widespread hardship, and banking system collapse. The Beirut explosion in 2020 further worsened the situation. The economy relies heavily on tourism and financial services.

Basic info about the Lebanese Pound:

• Currency code: LBP
• Issuer: Lebanon
• Current exchange rate: approximately 89,751 LBP per 1 USD
• Currency management policy: multiple exchange rates

2. Iranian Rial: Impact of Economic Sanctions

The Iranian Rial (IRR) first appeared in the 19th century when Iran was Persia. In 1932, a new “rial” was introduced, pegged to the British pound. However, the 1979 Islamic Revolution transformed the political and economic system.

The IRR has been among the lowest for years due to US sanctions and international tensions. Ongoing geopolitical stress, over-reliance on oil exports, and hyperinflation have caused its value to plummet.

Iran’s economic issues:

Decades of sanctions, especially over nuclear programs, Iran-Iraq war, and economic isolation, have led to high inflation and currency devaluation.

Basic info about the Iranian Rial:

• Country: Iran
• Currency code: IRR
• Current exchange rate: about 42,113 IRR per 1 USD
• Currency policy: pegged to USD in theory, managed floating in practice

3. Vietnamese Dong: Recovery from Crisis

In 1954, Vietnam was divided, with both sides issuing their own currencies called “dong.” After reunification, the dong became the national currency. Initially, it faced high inflation, devaluation, and economic reforms.

Since the 2000s, Vietnam’s economy has stabilized, and the dong benefited from this. Vietnam uses a managed floating system, allowing some volatility within set bounds.

Vietnam’s monetary policy and currency:

Despite economic growth, the dong remains weak due to strict controls and limited exchange options. However, its relative weakness benefits Vietnam’s export competitiveness, as the country maintains a trade surplus.

Basic info about the Vietnamese dong:

• Currency code: VND
• Issuer: Vietnam
• Current exchange rate: approximately 26,040 VND per 1 USD
• Currency management: managed floating with a basket reference

4. Laotian Kip: Economic Reform Efforts

The Laotian Kip (LAK) was introduced in 1952 after Laos gained independence from France. Initially pegged to the French franc, it became more volatile in the 1990s amid economic reforms.

Laos ranks among the least developed economies in Southeast Asia, relying on agriculture and natural resources. Foreign investment is limited, and industrial and service sectors lack growth.

Why is the Kip undervalued?

Post-COVID-19, the Kip faced pressures from high inflation and ongoing economic challenges. Slow economic development, limited global integration, and dependence on agriculture have kept the currency weak.

Basic info about the Laotian kip:

• Currency code: LAK
• Issuer: Lao People’s Democratic Republic
• Current exchange rate: about 21,626 LAK per 1 USD
• Currency policy: managed float, pegged mainly to USD and Thai Baht

5. Indonesian Rupiah: Emerging Economy’s Fragility

The Indonesian Rupiah (IDR) has been among the cheapest currencies globally for decades. As a developing market with high inflation, its value remains low.

Indonesia gained independence from the Netherlands in 1945, introducing the rupiah shortly after. Initially pegged to the Dutch East Indies gilder, it experienced instability due to hyperinflation, political turmoil, and the 1997-98 Asian financial crisis.

Indonesia’s economic situation:

Despite being the world’s 4th largest population and experiencing significant growth, the rupiah remains weak due to reliance on commodity exports, sensitivity to global commodity prices, and central bank interventions. Limited foreign reserves also pose challenges.

Basic info about the Indonesian rupiah:

• Currency code: IDR
• Issuer: Indonesia
• Current exchange rate: approximately 16,275 IDR per 1 USD
• Currency policy: free-floating system

6-10. Other Weak Currencies and Economic Challenges

Uzbekistan’s UZS is low due to strict economic controls. The Guinean Franc GNF suffers from political and economic instability. Paraguay’s PYG weakens mainly due to reliance on agriculture. Madagascar’s MGA and Burundi’s BIF face poverty and large trade deficits.

Summary: Understanding Currency Valuation Factors

Countries with the weakest currencies are influenced by multiple factors such as interest rates, inflation, public debt, political stability, and current account balances. Higher interest rates often attract foreign investment, increasing demand and currency value. Conversely, high inflation erodes currency worth.

A country’s current account balance indicates economic health; deficits can hinder investment and weaken the currency. Economic recession reduces interest rates, decreases foreign capital inflow, and depreciates the currency. Recognizing these factors helps us assess the cheapest currencies and their impact on the global economy.