1 Sovereign – Gibraltar

In 2023, Gibraltar's currency situation remained defined by its unique constitutional position and its deep economic integration with the United Kingdom. As a British Overseas Territory, the official currency is the Gibraltar pound (GIP), which is issued by the Government of Gibraltar and is pegged at par with the British pound sterling (GBP). This parity is legally enforceable, and sterling circulates interchangeably alongside the local notes throughout the territory, forming a de facto currency union. The Gibraltar pound is not, however, legal tender in the United Kingdom, though it can be exchanged there at par.

The year saw no significant changes to this long-standing monetary framework. The local economy, heavily reliant on tourism, online gaming, and financial services, continued to operate seamlessly with this dual-currency system. However, Gibraltar's close ties to the UK meant it remained indirectly exposed to broader macroeconomic pressures affecting sterling, notably the Bank of England's interest rate hikes throughout 2023 to combat inflation. These measures influenced borrowing costs and economic activity in Gibraltar, despite the territory having its own financial regulator and not being part of the UK's domestic banking system.

Looking forward, the currency situation remains stable but is subtly influenced by Gibraltar's post-Brexit relationship with the European Union. The ongoing negotiations for a UK-EU treaty regarding Gibraltar's border with Spain have implications for cross-border fluidity and commerce. While the currency itself is not a subject of these talks, any significant impact on Gibraltar's service-based economy could indirectly affect monetary flows and the demand for GIP/sterling. Nevertheless, the peg to sterling is a cornerstone of economic policy, providing stability and confidence for both residents and the international businesses that form the backbone of the local economy.