Mogadishu – (Halbeeg) – Somalia will soon get its officially printed banknotes for the first time in over two decades ending the long reign of counterfeit notes and unregulated monetary policy.
With footprints of two decades old civil war still visible in the country, Somali leaders have been working on means and ways to rid the country of the old counterfeit notes in place of new currency.
Finally, the government last week, publicized samples of the new currency including 5,000 and 10,000 notes. The Central Bank will also print 50,000 Somali Shilling note making it the highest denomination in the Eastern Africa region.
The ministry for Finance indicated that printing new currency would boost the economy and would make Somali Shilling worth.
Finance minister Abdirahman Dualeh Beileh made the announcement in his office in Mogadishu last week, where he displayed two samples of the new notes.
Supersede counterfeit notes
“My government is determined to print new currencies of the Somali Shillings that include 5,000 and 10,000 denominations,” said Dr. Beileh.
After the fall of Somalia’s central government in 1990, nonconforming monetary System emerged.
Warlords and cartels took control of the monetary System and contracted foreign printers and imported billions of counterfeit Somali Shilling.
A reliable source privy to the process of the printing told Halbeeg News that the new currencies will replace the fake and the old ones that were largely out of circulation.
“The printing and usage of the currencies undergo different stages. The proposed banknotes will include different denominations with lowest one being 1,000 to replace the fake and worn out 1,000 shilling,” said our source.
The country will also get lower denominations including 1,000, 2,000, 5,000 and 10,000, according to CBS officials.
“To curb on the complication of the money circulation, the government plans to produce various denominations because one currently in use is only 1,000, therefore printing more denominations will make the circulation easier,” he added.
Foreign Exchange rate
Since 1990, remittances to Somalia have outstripped all Overseas Development Aid (ODA) leading to enormous inflows of foreign currencies especially US dollars.
About two million Somalis living in Diaspora send approximately $1.4 billion back home annually, according to the World Bank report in 2016.
Though at the early stages the inflows of US currencies led to an appreciation of the Somali Shilling, the emergence of fake Somali shilling notes and ultimate dollarization of the economy forced the market to fully opt for the dollar against the local currency,
Mohamed Farah Bishar, an economist and a lecturer at Mount Kenya University in Nairobi said getting new currencies will help Somalia boost its economy.
Bishar adds the new move to print money with security features will also prop the Shilling’s value.
“If Somali government succeeds to print the money, the government will be able to set the exchange rate thus the shilling will gain its value,” Bishar indicated.
The country’s Central Bank was revived in 2011 but remains unable to enforce monetary policy despite having Monetary Policy Management Committee (MPMC).
One of Central Bank of Somalia (CBS) Board members who spoke to Halbeeg News on condition of anonymity shares a similar view with Bishar on the value.
“In the future, CBS plans to impose measure to control Foreign Exchange Rate appreciation but for now the Bank focuses to eradicate the counterfeit notes that supplanted the worn out Somali shilling,” said the official.
After Somalia adopted the Federal system of government, the country underwent a transformation that led to protracted political squabbles over leadership and power separation.
The country experienced disagreements between the president and his prime minister or between the federal government and member States.
The Somali Provisional the constitution gives considerable executive powers to both the president and the council of ministers.
With no concrete agreement signed by the leaders and lack of amendment of articles in the constitution, it is hard to produce new currency for the country, according to a former state Minister for Finance, Abdullahi Mohamed Noor.
“Printing Somali new currency is important as is common practice everwhere, but what is more important than printing is to put in place and implement all the requisite conditions rather than issuing with the intention of political propaganda and ignoring all the potential economic risks,” said Noor.
The ministry for Finance recently held discussions with the financial institutions of the member states on harmonization of tax and the proposed plan to produce new currency.
In spite of talks between the federal government and its member states, Halbeeg News understands that the states have not yet clarified their stance on the printing.
Though Al-Shabaab lost control most of the major cities and towns, the group still controls large swath of remote areas in central and South Somalia.
With more than a decade of struggles to depose Somali government, the group imposed curfews in some places and banned smart phones from their territories.
In 2010 and 2014, Al-Shabaab banned secular subjects including English, science studies in schools in its controlled areas in central and South Somalia.
Bashir says the main challenge that the new banknotes face is likely to be Al-Shabaab group.
“It is possible the circulations of currency may face obstacles from Al-Shabab. The group may ban the new currency from the areas under its control,” Bashir said.
According to officials who spoke to Halbeeg News, the country may not get its new banknotes printed in the next one year.
“The government has not yet secured the amount need for the printing of the currency. After the conclusion of the all phases and agreement on correct currency samples, IMF will hold a conference on means to help Somalia to print the money. The forum will be attended by UN and international donors,” CBS board official said.