The smallest currencies in the world market: Why are these currencies depreciating?

Currencies around the world do not have the same value. Some have very high exchange rates against the US dollar, reflecting economic challenges, political instability, or poor monetary policy management. Let’s take a look at the cheapest currencies in the world and the obstacles faced by those economies.

The Weakest Currencies in the World: Comparative Data

Lebanese Pound (LBP): The Lowest Valued Currency

Lebanon is facing the worst economic crisis in modern history. The Lebanese Pound has depreciated by over 90% in the black market in recent years. The main reasons are political instability, a banking system collapse, and a lack of foreign earnings. Lebanon defaulted on its debt in 2020, and triple-digit inflation continues.

Iranian Rial (IRR): Due to Sanctions and Tensions

The Iranian Rial ranks as the second least valuable currency in the world. The causes include prolonged economic sanctions, ongoing geopolitical tensions, and heavy reliance on oil exports. Political instability, nuclear risks, and disconnection from global markets have led to a continuous loss of value for the Rial.

Vietnamese Dong (VND): Managed Exchange Rate

Although Vietnam has achieved economic development, the Vietnamese Dong remains one of the cheapest currencies globally. The managed floating policy by the central bank helps sustain the economy but intentionally weakens the currency to make exports more competitive. This policy is considered a strategic move, as Vietnam maintains a trade surplus and benefits from regional markets.

Laos, Thailand, Indonesia: Fragile Southeast Asian Economies

Lao Kip (LAK) at 21,625 per dollar reflects the least developed economy in the region. Laos relies heavily on agriculture, lacks industrial diversification, and foreign investment is limited.

The Indonesian Rupiah (IDR) at 16,275 per dollar, despite Indonesia being one of Asia’s largest economies, remains weak due to high commodity dependence and frequent central bank market interventions.

Uzbekistan, Guinea, Paraguay: Small Economies, Major Crises

Uzbekistan (UZS) and Guinea (GNF) are countries whose currencies depend on natural resources and strict exchange rate controls. Uzbekistan has only begun reform in the past 15 years, but inflation and government controls still limit growth.

Guinea faces political instability, corruption, and weak infrastructure, which prevent the currency from appreciating.

Paraguay (PYG) differs from other currencies in the region. As a small economy reliant on agricultural exports, especially soybeans, market instability causes the Guarani to be highly volatile.

Madagascar and Burundi: The Poorest Countries in the World

Madagascar’s Ariary (MGA) is at 4,467 per dollar. The country depends on tourism, agriculture, and resource exports but is limited by natural disasters and political instability.

Burundi’s Franc (BIF) at 2,977 per dollar is the cheapest currency on this list. Burundi is one of the poorest countries globally, facing chronic trade deficits, food insecurity, and unrest. Foreign aid remains a primary support for its economy.

Major Factors Causing Currency Depreciation

Inflation is the number one enemy. Countries with high inflation see their currencies weaken because demand drops, and foreign investors seek safer assets.

Political instability is a critical warning sign. Conflicts, authoritarian governance, or debt defaults cause investors to flee to stable currencies.

Dependence on commodities and exports makes currencies vulnerable to price swings. When oil, metals, or agricultural prices fall, economies and currencies decline.

Lack of foreign investment reduces capital inflows, decreasing domestic currency demand.

Poor monetary policies such as excessive money printing, uncertainty, and poor public debt management all lead to currency devaluation.

The weakest currencies in the world serve as a measure of a country’s economic health. The more a currency depreciates, the more it indicates economic challenges and the state of the country’s financial institutions.