Somalia to print first banknotes in 25 years

IMF to help Mogadishu regain control of currency from counterfeiters

Somalia, a country where up to 98 per cent of local banknotes are fake, is about to embark on the massive task of taking back control of its currency.

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With the help of the International Monetary Fund, Mogadishu plans to print official banknotes for the first time in more than a quarter of a century in an effort to beat the counterfeiters. No official Somali currency has left the presses since the Horn of Africa nation descended into clan warfare after the collapse of the government in 1991. In the years that followed, warlords, businessmen and breakaway regions printed counterfeit notes or shipped them in from abroad. The central bank, which ceased operations for much of the 1990s, reopened in 2009. It still has no control over monetary policy. During the first phase of the plan to introduce the new currency the only denomination printed will be 1,000 shilling notes, worth about 5 US cents, said Mohamad Elhage, the IMF’s mission chief in Somalia. Other denominations have fallen out of use, he said. “We are putting the building blocks of addressing distortions in the economy, including more robust monetary policy and exchange rate policy,” he said. “For that, you need to be able to issue your national currency. But issuing a new currency is not an easy task.” Mr Elhage said several important issues, including what the government would use to back its new currency, were still being discussed. So was the question of what the conversion rate would be of fake Somali shillings for the new official ones. Use of Somali shillings, largely limited to the less well-off rural population, comes a poor third to US dollars and electronic money in what is a mostly dollarised economy. Dollars in circulation come from the sale of livestock, aid or remittances, which, at $1.4bn, make up nearly a quarter of Somalia’s gross domestic product. Some dollars in circulation are also fake, though the IMF said it had “no clue” how many.

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Peter Little, author of Somalia: Economy Without State, said the country became a darling of libertarians because the absence of government obliged its citizens to figure things Need an affordable deal for the purchase of your strattera? Buy it at our online store for $0.73 only! out for themselves. Somalis have used an honour-based underground money-transfer system called hawala and were pioneers of mobile money. However, Mr Little said, “the economy without a state has kind of run its course”. He said lack of effective government meant there were no public institutions. “Public health and education have really lagged.” Somalia, a byword for chaos, kidnapping and violence, had shown tentative signs of progress, Mr Little said. In 2015, the UN upgraded it from “failed” to “fragile” state, although bombs regularly rip through Mogadishu and other parts of the country. Last month, Somalia elected a new president, but the indirect poll had to be held in the heavily fortified airport for fear of attacks from al-Shabaab militants. Severe drought has put millions of people at risk.

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Peter Little, author of Somalia: Economy Without State, said the country became a darling of libertarians because the absence of government obliged its citizens to figure things out for themselves. Somalis have used an honour-based underground money-transfer system called hawala and were pioneers of mobile money. However, Mr Little said, “the economy without a state has kind of run its course”. He said lack of effective government meant there were no public institutions. “Public health and education have really lagged.” Somalia, a byword for chaos, kidnapping and violence, had shown tentative signs of progress, Mr Little said. In 2015, the UN upgraded it from “failed” to “fragile” state, although bombs regularly rip through Mogadishu and other parts of the country. Last month, Somalia elected a new president, but the indirect poll had to be held in the heavily fortified airport for fear of attacks from al-Shabaab militants. Severe drought has put millions of people at risk.

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