Somali shilling

Somali shilling. The official currency of the Federal Republic of Somalia, the Somali shilling is issued by the Central Bank of Somalia. It is subdivided into 100 senti, though subunits are no longer used due to inflation. The currency exists in a complex monetary environment with multiple concurrent issues and significant counterfeiting challenges.

History

The Somali shilling was introduced in 1962, replacing the East African shilling at par, following the independence of Somalia from Italy and British administration. This move was a key step in establishing national sovereignty under the leadership of Aden Abdullah Osman Daar. The initial stability was severely disrupted by the collapse of the Siad Barre regime in 1991, which led to a prolonged period of statelessness and the cessation of formal monetary authority. During the Somali Civil War, various interim administrations and autonomous regions like Somaliland and Puntland began issuing their own currencies, leading to fragmentation. The Transitional Federal Government, established in 2004, and its successor the Federal Government of Somalia, have worked to reassert the national currency's primacy through the revived Central Bank of Somalia.

Coins

The first coins, introduced in 1967, were minted in denominations of 5, 10, and 50 senti and 1 shilling, featuring the national emblem. A second series was issued in 1970, following the 1969 Somali coup d'état that brought Siad Barre to power, with new designs reflecting the Supreme Revolutionary Council. These coins were struck at the Royal Mint in the United Kingdom and at the Istituto Poligrafico e Zecca dello Stato in Italy. High inflation rendered these coins obsolete by the late 1980s. In the 21st century, the Puntland administration has issued its own Puntland shilling coins, while Somaliland circulates the Somaliland shilling, further complicating the numismatic landscape.

Banknotes

Banknote issuance has been turbulent, with several distinct series. The first notes were issued by the Banca Nazionale Somala and the Cassa per la Circolazione Monetaria della Somalia prior to 1975. Following the establishment of the Central Bank of Somalia, new series were printed, often featuring iconic structures like the Mogadishu Lighthouse and portraits of notable figures. After 1991, a vast array of unauthorized "republic" notes flooded the market, printed by various warring factions and businessmen. The Transitional Federal Government authorized a new series in 2005-2006 to combat counterfeiting. The current series, issued by the reconstituted Central Bank of Somalia, includes high-denomination notes like the 10,000 shilling, reflecting persistent inflation.

Exchange rates

The Somali shilling has no official fixed exchange rate and its value is determined by the informal Hawala market. It trades at a significant discount to major currencies like the United States dollar and the Euro. The coexistence of multiple currency issues—the pre-1991 "scudo" notes, the post-2006 "dinar" notes from Mogadishu, and the distinct Somaliland shilling—creates a multi-tiered exchange system. Remittances from the Somali diaspora, facilitated by firms like Dahabshiil, are a critical source of foreign exchange and heavily influence the market rate. The International Monetary Fund has engaged with Somali authorities on reforms to unify and stabilize the exchange rate regime.

Monetary policy and regulation

Monetary policy is the mandate of the Central Bank of Somalia, which was re-established in 2009 with support from the International Monetary Fund and the World Bank. Its primary challenges include establishing credibility, combating widespread counterfeiting, and managing the money supply in a largely cash-based economy. The bank works with the Financial Reporting Centre to combat money laundering and the financing of Al-Shabaab under international frameworks. Efforts to modernize the financial system include promoting mobile banking services like EVC Plus and introducing a new series of banknotes with advanced security features. The long-term goal is to achieve macroeconomic stability and eventually reintroduce a lower-denomination currency.

Category:Economy of Somalia Category:Currencies of Africa Category:Shilling