BBD - Barbadian Dollar

The History of Barbadian Dollar

As Barbados is a former British colony, the country’s currency - Barbadian Dollar is closely tied to the monetary history of British Eastern Caribbean territories. 

In 1821, Britain adopted the gold standard and, following the proclamation of 1838, Barbados officially began using sterling coinage in 1848. Despite this adoption of British coins, the Barbadian eight-penny silver coin continued to circulate and was used alongside the dollar in private transactions. 

In 1873, an economic crisis led to the official withdrawal of the silver dollar from Barbados in 1879. In 1882, the first paper currency in dollar denominations was introduced, circulating alongside the British pound. In 1949, with the introduction of the British West Indies dollar, Barbados' currency was officially linked with that of the British Eastern Caribbean territories. 

In 1955, the British sterling coinage was replaced by a new decimal system, where the new cent was worth half of the old penny. In 1965, the Eastern Caribbean dollar took the place of the British West Indies dollar in Barbados.

In 1965, the Eastern Caribbean dollar officially replaced the British West Indies dollar in Barbados. The Central Bank of Barbados was established in 1972, and it issued the current Barbados dollar (BBD), replacing the Eastern Caribbean dollar in 1973. In 1975, the Barbados dollar was pegged to the US dollar at an exchange rate of 1 US dollar = 1.98 Barbados dollars.

Barbadian Dollar denominations

The Barbadian Dollar (BBD) is issued in two main forms of coins and banknotes. 

Barbadian Dollar Coins

In 1973, Barbados issued its own currency, which includes the following coin denominations: 1¢, 5¢, 10¢, 25¢, and $1.

• The first 1¢ coin was minted from copper, and later from copper-plated zinc. 

• The 5¢ coin is made of brass and features an image of the South Point Lighthouse, which is the oldest lighthouse in Barbados.

• The three highest denominations—10¢, 25¢, and $1—are minted from nickel. The coins depict laughing gull, Morgan Lewis windmill and a flying fish respectively. The $1 coin has seven equal curved edges. All the five circulating coins have the coat of arms of Barbados on its observe.

Barbadian Dollar Banknotes

The circulating banknotes of the Barbadian Dollar include:

• $2 in light blue

• $5 in green

• $10 in brown

• $20 in purple

• $50 in orange

• $100 in gray

On December 3, 1973, the Central Bank of Barbados issued banknotes with denominations of $1, $5, $10, $20, and $100. Following this, the $2 note was introduced in 1890, and the $50 note was issued in 1989. The $1 note was no longer issued after 1988.

On March 21, 2022, the Central Bank of Barbados announced a decision to replace paper banknotes with polymer notes for improved safety and durability. The new polymer banknotes were officially launched and put into circulation on December 5, 2022.

Current value of Barbadian Dollar

The Barbadian Dollar is currently pegged to the US dollar at a fixed rate of 1 USD = 2 BBD. This exchange rate has remained quite stable since 1975, meaning that the Barbadian Dollar does not experience significant fluctuations against the USD and maintains its position in the international market.

The fixed rate also supports key industries in Barbados, like tourism and finance, by simplifying foreign transactions with its most significant trading partner, the United States​.

However, the actual value and purchasing power of the BBD can be influenced by several factors:

• Fixed Exchange Rate with the USD: Pegging the currency to the USD ensures stability and minimizes volatility for the BBD, especially in international transactions. This is beneficial for key economic sectors such as imports, tourism, and trade.

• Economic Conditions: The strength of Barbados's currency is bolstered by robust growth in sectors like tourism, financial services, agriculture, and foreign investment, which contribute positively to the national currency's value.

• Monetary and Fiscal Policies of the Central Bank: Decisions regarding monetary policy, such as interest rate adjustments or other economic stabilization measures, significantly affect the value of the BBD.

• Domestic Inflation: Inflation impacts the purchasing power of citizens and businesses, thereby reducing the actual value of the BBD. Although the Central Bank has been able to control inflation, external factors such as supply chain issues and global price fluctuations still exert pressure on the BBD.

• Political Stability: The stable political environment in Barbados helps maintain confidence in the BBD. However, economic factors still have a substantial influence, necessitating long-term solutions to uphold the value of the Barbados dollar.

• Economic performance: The strength of key sectors, such as tourism, international trade, and foreign investments, directly impacts the demand for the BBD and its ability to retain value.

As one of the largest contributors to Barbados' GDP, tourism plays a pivotal role in foreign exchange earnings. The influx of foreign tourists, particularly from countries like the United States and the United Kingdom, generates demand for foreign currencies. The steady flow of USD and other foreign currencies into the country supports the BBD's fixed exchange rate by increasing foreign reserves. A decline in tourism, as seen during global crises like the COVID-19 pandemic, can strain these reserves and weaken the BBD’s purchasing power domestically​.

Together, these factors form the economic foundation that enables Barbados to maintain the stability of its currency, the Barbadian Dollar (BBD). However, they also represent potential vulnerabilities, especially in the context of global economic fluctuations. 

While the Barbadian Dollar is pegged to the US Dollar, its stability is still influenced by domestic factors like inflation and fiscal policy, as well as external pressures from international trade, tourism, and foreign investments. Safeguarding the value of the BBD in the long term depends heavily on maintaining healthy economic conditions and implementing effective monetary and fiscal policies.