Under pegged exchange rate systems, currency boards back up the total amount of currency issued in the economy with an equivalent amount held in reserves of the currency board. In Brunei Darussalam, the local currency is pegged to the Singapore dollar at par.

Under the Currency Order, 2004, only BDCB is allowed to issue Brunei notes and coins. Additionally, the Currency Order, 2004, also requires us to back up every note and coin issued. This is to ensure confidence and stability in the Brunei dollars, and hence, eases trade and investment.

In addition, this means the Singapore dollar anchors the Brunei dollar, and Singapore's monetary policy has a direct influence on monetary conditions in Brunei Darussalam. Singapore uses the exchange rate as its monetary policy tool. The longstanding monetary policy framework based on the Currency Interchangeability Agreement, has been beneficial for macroeconomic stability

Inflation in Brunei Darussalam has also been low and stable, averaging 1.1% over 1981 to 2023.

Under the Currency Interchangeability Agreement, Brunei Darussalam Central Bank (BDCB) and Monetary Authority of Singapore (MAS) as well as licensed banks in Brunei Darussalam and Singapore are obliged to accept and exchange each other's currencies as equal and without charge into their own currency.

The value of the Brunei dollar and the Singapore dollar are always equal.

However, the Brunei currency is customary tender in Singapore, and the Singapore currency is customary tender in Brunei Darussalam.

As such, as Singapore currency acts as customary tender in Brunei Darussalam, all other businesses such as retailers and money changers within the country are not obliged to accept the Singapore currency - and vice versa for the use of Brunei currency in Singapore. So, retailers in Brunei Darussalam may choose to not accept the Singapore currency, and retailers in Singapore may choose to not accept the Brunei currency.

The arrangement removes exchange rate risks between the two countries and reduces the cost of doing business between them, which in turn eases tourism, trade and investment.

Under the Currency Interchangeability Agreement, the authorities are to return the customary tender collected through currency repatriation, which means BDCB returns the Singapore currency to MAS and likewise, MAS returns Brunei currency to BDCB.