What Is Revaluation?
A revaluation specifically means that there is a change in the price of goods and services, which changes the value of certain products throughout the wider economy. However, the term is more broadly used, in today’s economic landscape, in reference to the value of a currency with other, foreign currencies that it interacts with. The basis of trading currency is founded on acts of revaluation.
The International Monetary Fund, or IMF, is an international organization that was created to help foster the world into a more global marketplace, and to provide economic stability and regulations on international trade. The promotion of global economic growth is the prime function of the IMF. One of the most powerful abilities of the IMF is that it is able to create periods of revaluation and devaluation for different currencies. There are several historical precedents of this, particularly in times of crisis.
Devaluation, as you can probably guess, is the opposite of revaluation. When a currency goes through devaluation, it means that a currency is valued less, compared to goods and services that can be purchased, as well compared to the exchange rate of other foreign currencies. It must be noted that there is a distinct difference between depreciation and devaluation, although they have similar effects on the purchasing power of a currency.
Example in Kuwait
One of the most notable examples of the IMF fostering a period of revaluation was in Kuwait during the early 1990’s. After Iraq invaded Kuwait and sparked events that led to the first Gulf War, Kuwait’s economy tanked, especially after its oil fields were captured by the Iraqi military. This caused the currency in Kuwait to depreciate to the point that it was almost worthless, in terms of purchasing power. After the Gulf War, the IMF revalued Kuwait’s currency, locked the exchange rate for Kuwaiti dinar above $3.20 USD.