A team from the International Monetary Fund (IMF) visited Nairobi in November 2016 to conduct its annual review (Article IV* consultation), of the economic situation in Somalia and first review under the Staff–Monitored Program (SMP**). The IMF board has discussed in February 2017 and published its results. The IMF has analysed a number of areas. They concluded that Somalia has marked important milestones in rebuilding its economy and normalizing relations with international financial institutions. With donors’ support, progress is being made in the Federal Government of Somalia’s (FGS) efforts to improve security, capacity development, and state building.
The IMF also emphasized that the post-war social and economic conditions remain difficult, poverty is widespread, and more than half of the working-age population is unemployed. As a component for the Somalia’s one-year IMF Staff-Monitored Program (SMP), May 2016-April 2017, the Central Bank of Somalia (CBS) has adopted a comprehensive currency reform roadmap. The IMF board supported the authorities’ currency reform strategy, and noted that this reform would limit counterfeiting, restore credibility of the national currency, and allow the central bank to conduct monetary policy. At the same time the IMF points out that sound and successful implementation of the currency reform hinges on careful preparation and planning, and advises that Somalia to follow through on the currency reform roadmap as agreed with the IMF.
”Having not issued banknotes since 1991, currency reform is a much needed component of Somalia’s economic recovery”, says the CBS governor Bashir Issa. Currently, the CBS has no control over the exchange rate or monetary supply, and the bulk of transactions in Somalia (either via cash or mobile money transfers) are made using US dollars or counterfeit Somali shillings. The governor also added that the roadmap sufficiently articulates all applicable technical and governance issues for successful new currency reform. There are a number of priority benchmarks along with technical assistance to support the comprehensive currency reform. The first phase of the new currency reform will start when the Bank has finished its preparations and the full funding of the currency reform is secured. No dates have yet been set for the launch of the new currency.
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