Saudi Riyal (SAR): Definition, History, Exchange Rate to Dollar

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Updated December 29, 2023
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What Is the Saudi Riyal (SAR)?

SAR is the currency abbreviation for the Saudi Riyal, the official currency of Saudi Arabia. The Saudi Riyal is made up of 100 halalas and is often presented with the symbol SR.

The Saudi riyal is pegged to the U.S. Dollar at an exchange rate of 3.75 SR to a dollar.

Key Takeaways

  • The Saudi Riyal (SR) is the national currency of Saudi Arabia and is managed by the Saudi Central Bank.
  • The SAR is pegged to the U.S. Dollar at an exchange rate of 3.75 SR to 1 USD.
  • Saudi Arabia's economy is driven by the oil and gas industry and is the world's second-largest producer of oil in the world after the U.S.
  • Saudi Arabia's oil and gas industry is controlled by Saudi Aramco, which is controlled by Saudi Arabia's Ministry of Petroleum and Mineral Resources and the Supreme Council for Petroleum and Minerals.

Understanding the Saudi Riyal (SAR)

The Kingdom of Saudi Arabia was established in 1932 by combining the Kingdom of Hejaz and the Sultanate of Nejd. After its creation, Saudi Arabia used a bimetallic monetary system based on British gold sovereigns and silver Riyals.

In 1952, the monetary system was reformed to use a single currency. This currency, the Saudi Riyal, was backed by Saudi gold guineas equivalent to the British gold sovereign until 1959. At that time a system based on fiat money issued by the Saudi Arabian Monetary Agency was created. This is the Saudi central bank.

Before the Saudi Riyal was pegged to the U.S. dollar, it was pegged to the SDR, which is a basket of currencies created by the International Monetary Fund.

Speculation on the Riyal briefly rose to a 20-year high in 2007 when the U.S. Federal Reserve slashed interest rates in the wake of the Great Recession. The Saudi Central Bank chose not to follow for fear of hyperinflation, maintaining the exchange rate of 3.75 SAR. Because the Riyal is pegged to the U.S. dollar, its only correlation is to the "greenback."

Saudi Arabia's Economy

Saudi Arabia's economy is driven largely by its oil and gas industry. In 2020, the country produced 12.44 million barrels of oil per day, amounting to 13% of world output. Saudi Arabia and Russia competed for the top spot as the largest oil producer from 2003 to 2018, when the United States experienced a surge in oil production. It has held onto the top spot since then. Saudi Arabia remains the world's largest petroleum exporter.

With proven oil reserves of about 267 million barrels and relatively low production costs, Saudi Arabia should maintain its position as a top-three oil producer for the foreseeable future.

Saudi Arabia's oil and gas industry is controlled by Saudi Aramco, which is controlled by Saudi Arabia's Ministry of Petroleum and Mineral Resources and the Supreme Council for Petroleum and Minerals. Saudi Aramco is mostly state-owned but had an initial public offering (IPO) of 1.5% of the company in December 2019.

The United States is the world's largest oil producer, producing 21% of the world's oil. Saudi Arabia was the second-largest, producing 13% of the world's oil.

Although international oil companies do not participate in oil production in Saudi Arabia, there have been several partners with Saudi Aramco in joint-venture refineries and petrochemical plants. They include ExxonMobil, Sumitomo Chemical Co., Total S.A., and Royal Dutch Shell PLC.

The Riyal and the Volatile Oil Market

When oil prices plummeted In 2016, there was talk of a potential devaluation of the Riyal. Because oil is denominated in U.S. Dollars, a devaluation would have gotten them more Riyal for each barrel sold.

However, SAMA finally refrained from shifting the peg. Ultimately, oil prices rebounded off their lows and alleviated some of the pricing pressure.

Saudi Arabia is a member of the Gulf Cooperation Council and in 2010 there were talks of a single currency for the Gulf region. This has yet to come to fruition, although the topic has come up periodically in the region since.

What Is the USD to SAR Exchange Rate?

The exchange rate between USD and SAR is 3.75 USD to SAR. This has been a fixed exchange rate since 1986.

What Is the Saudi Riyal to Indian Rupee Exchange Rate?

As of the end of 2023, 1 SAR is equal to 22.20 Indian Rupees (INR).

How Much Saudi Riyal Can You Take to India?

You are not allowed to take more than 60,000 Saudi Riyal with you to India. This is a Saudi law, so it applies to any country.

Is the Saudi Riyal a Restricted Currency?

No, Saudi riyal is not a restricted currency. That means individuals are allowed to buy and sell SAR without any restrictions.

Why Is the Riyal Fixed to the Dollar?

The riyal is fixed to the dollar due to the complex historical relations between the two countries.

During the Arab-Israeli war in 1948-1949, the U.S. sided with Israel, causing Saudi Arabia to place an oil embargo on the U.S.

Eventually, the countries came to an agreement that the U.S. would purchase oil from Saudi Arabia. With the proceeds, Saudi Arabia would purchase U.S. Treasuries. Further, Saudi Arabia agreed to price its oil in U.S. dollars.

In return, Saudi Arabia received military assistance from the U.S. From there, economically, it benefited Saudi Arabia to peg its currency to the dollar as so much of its economy was dollar-based.

The Bottom Line

Saudi Arabia has used a single currency, the Saudi riyal, since 1952. The currency is pegged to the U.S. dollar at a rate of 3.75 riyal to a dollar. The country has sustained that rate through the many ups and downs of the global oil market.

Article Sources
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  4. Asset Allocation and Management LLC. "Exploring the Possibility and Implications of Saudi Arabia Abandoning its U.S. Currency Peg."

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  18. Life in Saudi Arabia. "How Much Gold/Cash Can I Carry From Saudi Arabia?"

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