The Central Bank of Somali chief seeks new currency in order to rebuild the nation
Somalia’s Central Bank Chief Bashir Issa Ali wants to recreate Somalia’s currency from scratch. Ali wants Somalia to print its first bank notes since the 1980s to help rebuild an economy emerging from decades of chaos at the hands of Islamists and clan militias.
“We absolutely need a new currency,” said Ali, adding that the existing notes “are old, they’re torn, they’re dirty and they’re fake”
Most Somalis in the urban areas use a mobile phone payment system with transactions denominated in dollars. Since African Union troops took control of Mogadishu from al Shabaab Islamist militants in 2011, hotels and restaurants have been opened.
Somalia’s government has had a hard time building a financial system that will pull the country’s 12 million people out of poverty.
The 73 year old banker returned to East Africa in 2005 from exile in Sweden to re-establish the central bank. Ali paid employees from his own savings during the initial stages of starting the bank.
According to Ali, Western diplomats whose nations are paying the salaries of soldiers and civil servants fear that the Somali government may push the central bank to print money to plug budget deficits.
Funding shortages and death of qualified financial experts has hurt the central bank a lot.
1000 shilling bank note is the only Somali bill that is in use, yet its value is very little. An estimated amount of 1.3 trillion shillings/ 56 dollars is estimated to be in circulation in Somalia that is including counterfeit currency printed by warlords and militias. According to Ali, people use the fake currency knowingly due to chronic shortages of the authentic pre-war currency.
In order to print bank notes pf 1000, 2000, 5000, 10,000 and 20,000 shillings an estimated 20 to 22 million dollars needed. Seeking help from the International Monetary Fund (IMF), Ali has proposed Somalia adopts a “currency board” to peg the shilling to the dollar, a system used by Hong Kong since 1983.
Since 2013, Ali has tried to build a financial system, inviting foreign banks to open offices in Mogadishu, joining remittance companies who form the cornerstone of Somalia’s banking system and act as a lifeline for millions.
None has taken up the offer. “They are highly interested but there is always the concern of security,” Ali said.
Ali has himself been threatened, and two of his employees have been killed in al Shabaab attacks in Mogadishu. That’s why Ali keeps the pistol in his desk, with a bullet loaded in the chamber.
