Getting to know the Dirham (درهم)

‘Dirham’ (درهم) is the unit of currency used in UAE. The word is derived from a unit of mass used in the Ottoman Empire. 1 dirham in those days was equivalent to 3.207 grams. 400 dirham was equal to 1 oka. The word itself (dirham) is derived from ‘dirhem’, which came from the name of a Greek coin – Drachm. Later on it was used as the currency of some Arabic countries. The UAE dirham was introduced in 1973 to replace the Qatari and Dubai riyal. It became the currency of the 7 emirates which formed the UAE.

The bank notes are printed in denominations of 5, 10, 20, 50, 100, 200, 500 and 1000 dirhams. One side in Arabic and the other side in English. Coins are available in denominations of 1, 5, 10, 25, 50 fils and 1 dirham. (1 dirham = 100 fils). The coins are written in Arabic only – which could be troublesome if you could not read Arabic numerals.

As it stands now, the UAE dirham is pegged to the US dollar. And with the sliding USD versus major currencies, there is intense pressure to revalue the dirham. The huge foreign worker population here is faced with less earning power when they convert their dirhams into euros, pounds or rupees. At the same time, imported inflation due to a weak dirham is raising the cost of living in UAE. When I came here the exchange rate versus ringgit was Dh1.04 = RM1. Now the dirham has depreciated to Dh1.10 = RM1. There was a lot speculation that the Central Bank may revalue the Dirham, but it has been steadfast in maintaining the peg. For those who may not know, the Gulf countries of Kuwait, Qatar, Bahrain, Saudi Arabia and UAE are planning to form a monetary union (ala Euro) in a couple of years time. As part of the plan they have pegged all their currencies to the USD.