Somalia is preparing to reintroduce the Somali shilling nearly 35 years after it was last widely used, but the International Monetary Fund (IMF) has warned that the success of the plan will depend on the readiness of the Central Bank, financial institutions and the wider banking system.
The Central Bank of Somalia is preparing to issue new banknotes to replace existing Somali shilling notes. The move is intended to restore a legal currency for use in the country, where the US dollar remains heavily relied upon by businesses, banks and mobile money services.
However, reintroducing the shilling into an economy that has long depended on the dollar requires more than printing new banknotes. The IMF says Somalia needs sufficient foreign exchange reserves, a strong Central Bank, effective financial oversight and clear regulations before the new currency can be widely introduced.
The IMF has warned that a poorly managed transition could affect exchange rates and prices, potentially undermining public confidence in the new currency.
The Fund is not opposed to reintroducing the Somali shilling, but stresses that the process must be supported by financial institutions and a monetary system capable of protecting the currency’s value and maintaining public confidence.
As Somalia moves towards restoring the shilling’s role in the economy, the IMF says the success of the transition will depend on the country’s financial preparedness, the strength of its Central Bank, the effectiveness of its oversight mechanisms and how the shift between the dollar and the shilling is managed.
