The weakest currencies in the world: 10 currencies facing severe crises

In today’s global market, the weakest currencies in the world are not caused by a single factor but result from multiple interconnected reasons. These include soaring inflation, political instability, a lack of economic diversification, and declining foreign investment. Together, these factors create conditions that lead many countries to experience severe currency devaluation.

Common Factors Leading to the World’s Weakest Currencies

Most weak currencies share similar characteristics. Countries with depreciated currencies often face:

• High inflation that reduces consumers’ purchasing power
• Trade deficits increasing demand for foreign currencies
• Lack of investment from private and foreign sectors
• Political instability that creates investor concerns

The Top Ten Most Severely Depreciated Currencies

1. Lebanese Pound (LBP): When an Economic Crisis Turns into a Disaster

The Lebanese Pound, or Lira, has been the official currency since 1939. Historically, it was stable due to its peg to the US dollar, but the situation has drastically changed.

Lebanon has been in its worst modern economic downturn since 2019, with triple-digit inflation, widespread poverty, and a banking sector still paralyzed. The government defaulted on debt in 2020, and the Lebanese Pound has lost over 90% of its value on the parallel market.

Currency Data:

• Exchange rate: 89,751.22 LBP/USD
• Policy: Multiple exchange rates, not effectively pegged

2. Iranian Rial (IRR): Effects of Sanctions and Internal Issues

The Iranian Rial dates back to the 19th century when Iran was known as Persia. In 1932, a new Rial was introduced, pegged to the British Pound, but everything changed after the 1979 Islamic Revolution.

The main causes of its devaluation include US and allied sanctions, over-reliance on oil exports, geopolitical tensions, and ineffective economic management. These factors have led to hyperinflation and rapid loss of trust.

Currency Data:

• Exchange rate: 42,112.50 IRR/USD
• Policy: Officially pegged to USD but practically managed floating

3. Vietnamese Dong (VND): More Stable Yet Still Weak

The Dong was first introduced in 1954 after Vietnam’s division. Post-war, it became the national currency. Initially plagued by high inflation, Vietnam’s economy stabilized in the 2000s.

Despite rapid economic growth, the Dong remains weak due to strict control by the central bank. Its managed float allows for some fluctuation, but the currency’s depreciation benefits Vietnam’s trade surplus and export competitiveness.

Currency Data:

• Exchange rate: 26,040 VND/USD
• Policy: Managed floating, referencing a basket of currencies

4. Lao Kip (LAK): A Developing Economy Struggling

The Kip has been the official currency since 1952. Initially pegged to the French Franc, it became more volatile in the 1990s amid economic reforms.

Laos is one of the least developed countries in the region, heavily reliant on agriculture and resource exports, with limited foreign investment. Post-COVID-19, high inflation and sluggish growth have further weakened the Kip.

Currency Data:

• Exchange rate: 21,625.82 LAK/USD
• Policy: Managed float, pegged mainly to USD and Thai Baht

5. Indonesian Rupiah (IDR): A Fragile Emerging Market

The Rupiah has been in use since 1945, following independence from the Netherlands. It experienced high inflation and was severely affected during the 1997-98 Asian financial crisis.

Indonesia, with the fourth-largest population globally and a major regional economy, still sees the Rupiah weaken due to dependence on commodity exports, inflation, and capital outflows. Central bank policies are constrained by limited foreign reserves.

Currency Data:

• Exchange rate: 16,275 IDR/USD
• Policy: Free floating

6. Uzbek Sum (UZS): Slow Reforms and Controlled Economy

The Sum has been the official currency since 1994, after Uzbekistan’s independence from the Soviet Union. Economic reforms in the 2010s have been slow.

Heavily controlled by the government, reliant on resource exports, with limited foreign investment, the Sum faces persistent inflation and sluggish growth. Recent gradual liberalization has not yet stabilized the currency.

Currency Data:

• Exchange rate: 12,798.70 UZS/USD
• Policy: Free float, managed

7. Guinean Franc (GNF): Rich Resources but Economic Weakness

The Franc has been used since 1959, replacing the French Franc. Despite abundant natural resources, Guinea suffers from political instability, chronic economic crises, and weak infrastructure.

Dependence on agriculture and mining, limited foreign investment, corruption, and inflation have caused the GNF to depreciate steadily.

Currency Data:

• Exchange rate: 8,667.50 GNF/USD
• Policy: Managed float

8. Paraguayan Guarani (PYG): An Agricultural Economy Facing Debt

The Guarani has a long history, with multiple crises including the Chaco War (1932-1935), debt crises, and financial turmoil.

Relying heavily on agricultural exports like soybeans, Paraguay faces persistent trade deficits, high debt, and a small economy, leading to a weak and depreciated currency.

Currency Data:

• Exchange rate: 7,996.67 PYG/USD
• Policy: Free floating

9. Malagasy Ariary (MGA): Unique Currency Management

Introduced in 2005, replacing the Malagasy Franc, the Ariary is one of the few currencies not based on decimal systems (1 Ariary = 5 Iraimbilanja).

Madagascar’s economy depends on agriculture, tourism, and resource exports. High weather-related risks, political instability, and limited financial tools hinder efforts to control inflation.

Currency Data:

• Exchange rate: 4,467.50 MGA/USD
• Policy: Managed float

10. Burundian Franc (BIF): Struggling with Inflation

The Franc has been in use since 1964, replacing the Belgian Congo Franc. Burundi remains one of the poorest countries, with an economy based on subsistence farming.

Trade deficits, minimal industrial activity, reliance on foreign aid, inflation, food insecurity, and political unrest make the BIF one of the lowest-valued currencies.

Currency Data:

• Exchange rate: 2,977.00 BIF/USD
• Policy: Monetary policies focused on controlling inflation and liquidity

Key Factors Behind the World’s Weakest Currencies

Exchange rates are influenced by several main factors:

• Interest rates: High rates attract foreign investment, boosting currency value
• Inflation: High inflation erodes purchasing power, undermining confidence
• Current account balance: Deficits signal economic weakness and deter investment
• Economic recession: Leads to lower interest rates and currency depreciation
• Public debt: Rising debt raises concerns over repayment capacity
• Political instability: Deters investors, favoring safe assets

What Investors Should Know About the Weakest Currencies

A low currency does not mean it has no value; often, it reflects economic fragility and high risk. For traders, understanding the fundamental factors behind exchange rate movements is crucial. While these currencies may present trading opportunities, they also carry high risks and require in-depth knowledge of each country’s economy and politics.