STD - São Tomé and Príncipe Dobra

São Tomé and Príncipe Dobra overview

São Tomé and Príncipe Dobra (STD) plays a crucial role in the nation's economy, facilitating daily transactions and international trade. The São Tomé and Príncipe Dobra reflects the nation's efforts to maintain monetary stability and support economic development in a small and open economy.

In 2018, the country redenominated the Dobra to stabilize its economy and simplify transactions. The Dobra is currently pegged to the euro under a monetary cooperation agreement with Portugal.

The History of the São Tomé and Príncipe Dobra

The development of the São Tomé and Príncipe Dobra is closely tied to the country’s economic history. Before 1977, São Tomé and Príncipe used the Portuguese Escudo as its currency, equivalent in value to the Escudo used in Portugal.

However, in 1977, the Dobra officially replaced the Escudo at a 1:1 exchange rate. This change was driven primarily by the devaluation of the Escudo and the need for a new currency to reflect the economic reality of São Tomé and Príncipe after gaining independence from Portugal in 1975.

The name “Dobra” originates from the Portuguese word “dóbra,” which refers to an old gold coin, symbolizing the currency’s value and strength.

In 2018, the Dobra underwent redenomination as part of a monetary reform. The conversion rate was set at 1 New Dobra = 1,000 Old Dobras to address prolonged inflation and stabilize the economy. This reform was an important step in improving the functionality and trustworthiness of the nation’s currency.

São Tomé and Príncipe Dobra denominations

The Central Bank of São Tomé and Príncipe issues banknotes with denominations ranging from 5,000 Db to 100,000 Db. These banknotes are commonly used in daily transactions. In addition to paper money, the Dobra also has various coin denominations ranging from 100 Db to 2,000 Db. However, smaller coins such as 1, 2, and 5 Dobra have been withdrawn from circulation due to inflation and their devaluation.

The circulation of both coins and banknotes is crucial in maintaining the country's economic stability. However, these currencies are not immune to the effects of significant inflation, particularly during periods when the national economy faces difficulties. 

São Tomé and Príncipe Dobra coin denominations are as follows:

• 100 Db

• 200 Db

• 500 Db

• 1,000 Db

• 2,000 Db

São Tomé and Príncipe Dobra banknote denominations  are as follows:

• 5,000 Db

• 10,000 Db

• 20,000 Db

• 50,000 Db

• 100,000 Db

Fixed Exchange Rate System of the São Tomé and Príncipe Dobra

On January 1, 2010, São Tomé and Príncipe officially established a fixed exchange rate between the Dobra (Db) and the Euro (EUR) at a rate of 1 EUR = 24,500 Db. This decision resulted from an important agreement signed between the country and Portugal in 2009. The primary goal of pegging the exchange rate to the Euro was to stabilize the value of the Dobra, curb inflation, and build trust among international investors.

The fixed exchange rate brought significant benefits by helping São Tomé and Príncipe avoid major fluctuations in the global currency markets. As a result, the people and businesses in the country could plan their finances with greater certainty. Additionally, this linkage created an image of a more stable economy, which in turn encouraged long-term economic development.

Benefits of Pegging the Dobra São Tomé and Príncipe to the Euro

The decision to peg the Dobra to the Euro offered several specific advantages:

• Economic Stability: Reduced risks from sharp currency fluctuations, especially for a country like São Tomé and Príncipe, which is heavily reliant on imports.

• Attracting Investment: With a stable exchange rate, foreign investors are more likely to trust the country for transactions, business, or investments.

• Controlling Inflation: By keeping the exchange rate fixed, the prices of imported goods and services are less likely to increase sharply, helping to control inflation.

Challenges from the Fixed Exchange Rate System

Despite the advantages, pegging the Dobra to the Euro also brought some challenges:

• Dependence on Euro Value: Any fluctuations in the Euro's value on the international market could affect the real value of the Dobra. For instance, if the Euro strengthens against other currencies, it could reduce the competitiveness of exports from São Tomé and Príncipe.

• Difficulty in Adjustment: When the domestic economy faces challenges, adjusting the value of the Dobra to support the economy becomes more complicated due to its fixed relationship with the Euro.

São Tomé and Príncipe is a small economy primarily dependent on agriculture and natural resources. The exchange rate between the Dobra and the Euro plays an important role in many areas of the country’s economy.

In a context of global economic fluctuations, São Tomé and Príncipe needs to maintain a balance between the fixed exchange rate and the need for domestic economic policy adjustments. Long-term development strategies, such as diversifying the economy and reducing dependence on traditional export sectors, will help the country maintain the stability of the Dobra.

At the same time, continuously evaluating the effectiveness of the fixed exchange rate with the Euro is necessary to ensure that the São Tomé and Príncipe Dobra can continue to serve as a tool for supporting the country’s sustainable economic development.