Somalia Is a Leader in Mobile Money But Still Wants to Print Its First Cash Notes in 25 Years
Thursday, February 23, 2017
The collapse of the Somali government in 1991 saw the rise of unique political, economic and social outfits, all clambering to fill the void of government institutions. One of them was the emergence of a nonconforming monetary system, controlled by warlords and rogue businessmen, who contracted foreign printers and imported counterfeit money. This left the Somali economy in shambles, largely dependent on dollars for trade, and effectively created a freewheeling “economy without state.”
After a few years of relative stability and successful elections, Somalia’s new government hopes to reverse all that. Buoyed by donors, the International Monetary Fund (IMF) and the World Bank, the country now wants to resume printing banknotes this year.
But while the decision to introduce a new currency is welcomed, observers are worried about whether the country is fully ready to turn a new leaf. ‘The question is not when, it is how,” says Mohamed Dubo, publisher of The Somalia Investor magazine. While reissuing the Somali currency “is definitely required,” Dubo says, the federal government and the central bank shouldn’t rush into printing the money, but rather invest in a gradual process that brings all stakeholders on board.
Bretton Woods institutions have been providing capacity building and budget support to Somalia. Yet, as the central bank itself admits, lack of adequate resources and a monetary policy, not to mention corruption has hindered the creation of an effective system that could stop the high inflation rates or fix the largely dollarized economy. The central bank currently oversees only six banks and 12 money transfer companies, the majority of which are located in the capital.