Speaking at the opening ceremony of the new building of the Puntland Bank in Bosaso, Puntland President Said Abdullahi Deni made a remarkable call for the bank to conduct a feasibility study on the introduction of a separate currency for the semi-autonomous region. This proposal, which comes amidst growing concerns about the stability and legitimacy of the Somali shilling, has sparked a heated debate about the economic and political implications of such a move, both for Puntland and for the wider Somali federation.
President Deni’s remarks, which were carefully calibrated to emphasize Puntland’s commitment to remaining part of Somalia and eschewing secessionism, have nonetheless raised eyebrows in Mogadishu and beyond. The suggestion that Puntland could introduce its own currency, even while remaining within the fold of the Somali federation, has been seen by some as a provocative and potentially destabilizing move, one that could set a dangerous precedent for other regions and further undermine the authority of the central government.
The Somali Shilling’s Demise and the Dollarization of the Economy
At the heart of President Deni’s proposal lies the dire state of the Somali shilling, which has been in a state of steady decline for decades. The last legally printed Somali shillings date back to 1990, before the collapse of the Siad Barre regime and the onset of the civil war that fractured the country into competing fiefdoms and clan-based enclaves.
In the years since, the Somali shilling has been largely supplanted by the US dollar as the currency of choice for most transactions, particularly in urban areas and among the business community. The dollarization of the Somali economy has been driven by a combination of factors, including the lack of a functioning central bank, the absence of a credible monetary policy, and the proliferation of counterfeit Somali shillings, which have flooded the market and eroded public confidence in the currency.
The reliance on the US dollar has created its own set of challenges for the Somali economy, particularly for the poor and marginalized segments of society who may not have ready access to foreign currency. The lack of a stable and widely accepted national currency has also hindered the development of a robust formal economy, as businesses and individuals are forced to navigate a complex web of exchange rates and informal financial arrangements.
The Case for a Puntland Currency
President Deni’s call for a feasibility study on a separate Puntland currency can be seen as a response to these challenges, and an attempt to assert the region’s economic autonomy and resilience in the face of a dysfunctional national monetary system. By exploring the possibility of introducing its own currency, Puntland is effectively signaling its desire to take control of its economic destiny and insulate itself from the instability and uncertainty that have plagued the Somali shilling for so long.
Proponents of a separate Puntland currency argue that it could help to stimulate local economic activity, encourage investment, and create a more stable and predictable financial environment for businesses and consumers alike. They point to the success of other sub-national currencies, such as the Somaliland shilling, which has managed to maintain a relatively stable value and widespread acceptance despite the lack of international recognition for the self-declared republic.
Moreover, advocates of a Puntland currency argue that it could help to strengthen the region’s bargaining position vis-à-vis the central government in Mogadishu, and provide a powerful tool for asserting Puntland’s autonomy and distinctiveness within the Somali federation. By demonstrating its ability to manage its own monetary affairs and provide a stable and reliable currency for its citizens, Puntland could enhance its political and economic leverage and secure a greater share of resources and influence within the wider Somali state.
