Mogadishu (Caasimada Online) – Somalia’s central bank is working towards a new plan to replace the current high-value currency note in circulation with a new design by next year, according to Central Bank Deputy Governor Ali Yasin Wardhere.
The new 1,000-shilling notes will replace those printed before the outbreak of the civil war in 1991. The old currency has become increasingly scarce, and the new issuance is expected to combat illicit funds and curb inflation by reducing the amount of excess cash in circulation.
“The old currency has almost disappeared, and the new issuance will combat illicit funds and curb inflation by mopping up excess liquidity,” said Wardhere in an interview with Bloomberg News.
“The Shilling notes currently in circulation are too worn out, and many have been replaced with US dollars or privately printed notes, most of which are counterfeits.”
The central bank has been working on this plan since 2018, with the assistance of the International Monetary Fund and World Bank. The bank is also working to rebuild its capacity, which was hindered by the civil war, according to Wardhere.
The central bank plans to establish new branches in the capital cities of all federal member states by June, including Garowe, Baidoa, and Kismayo.
“The branches will help the central bank collect taxes, store money and become the central fiscal agent of the federal states,” said Wardheere.
Additionally, the bank has set up a unit specifically dedicated to combating the counterfeit money market. This unit will also be responsible for maintaining the value of the new money the central bank plans to print and will help to curb inflation, per Wardhere.
In August 2021, the Central Bank of Somalia announced the establishment of a new national payments system for the country, where financial systems were shattered by the collapse of the last central government in 1991.
“The latest step in creating a functional financial system for Somalia is the new national payments system,” said Wardhere.
Due to the lack of a functioning government and central banking authority, Somalia’s financial system could not meet the requirements for anti-money laundering and anti-terrorist financing regulations.
As a result, Somalis had to rely on unlicensed mobile money platforms or face-to-face transactions using cash or barter to meet their financial needs.
However, in recent years, the central bank has been working to rebuild the financial system, including granting the first license for mobile-money providers in early 2021 and introducing Visa card payment services in partnership with the International Bank of Somalia.
The new national payment system will connect financial institutions to a clearing and settlement platform, allowing them to process real-time money transfers.
The system also includes interoperability capabilities for debit and credit cards, automated cash machines, and mobile network operators. This will enable approximately 13 official lenders to become interoperable and connected to the central bank’s clearing and settlement system, marking the beginning of the process of integrating the various fragments of Somalia’s financial system.