Somalia’s plan to restore its national currency has come under parliamentary scrutiny, with lawmaker Abdullahi Arab questioning the legal and economic justification for a proposed rate of 100 Somali shillings to one US dollar.
The issue arose during the second reading of legislation to amend the law governing the Central Bank of Somalia.
Arab challenged Article 34(2) of the draft bill, arguing that lawmakers needed a formal economic assessment explaining how the proposed exchange rate had been determined.
“What is the economic and legal basis for determining in Article 34(2) that 100 Somali shillings equal $1, when no formal study has been presented to the House?” Arab asked during the parliamentary session.
He also raised concerns about the implications of the proposed arrangement for the Central Bank’s authority over monetary policy, calling for greater clarity on the legal framework and economic principles underpinning the currency plan.
Somalia’s Effort to Restore the Shilling
The parliamentary debate comes as Somalia works towards reintroducing the Somali shilling after decades in which the Central Bank has not issued a new series of banknotes.
In a December 2024 assessment, the International Monetary Fund (IMF) said Somali authorities planned to restore the shilling as legal tender, replacing old notes in circulation, many of which are believed to be counterfeit.
The currency reform is intended to rebuild public confidence in the national monetary system, improve access to financial services and make small cash transactions easier, particularly for people who have limited access to formal banking.
The IMF has also discussed plans for a currency-board arrangement, a framework designed to support currency stability by linking monetary issuance to foreign-exchange reserves under specified rules.
Somalia’s proposed approach would retain the US dollar alongside the shilling, rather than immediately eliminating the use of foreign currency.
However, the exchange rate discussed in parliament does not, by itself, establish the current market value of the Somali shilling or confirm that newly issued banknotes are already in circulation. The proposal remains part of the legislative and policy process.
MPs Seek Details on Banknotes and Implementation
Lawmakers have also asked the government and Central Bank to clarify how the new currency would be introduced. Their questions include the expected issuance date, the denominations and designs of the banknotes, and where the notes would be printed.
Some members of parliament have called for the Central Bank governor to appear before the House to explain the technical and financial aspects of the proposed reform.
The questions reflect broader concerns about how the currency would be introduced, how public confidence could be restored and what safeguards would be needed to ensure the process is credible and transparent.
Cash remains particularly important in rural communities and among small businesses and livestock traders, many of whom rely on physical currency and have limited access to digital payment systems.
A successful reform could help facilitate everyday transactions, but its effectiveness would depend on practical implementation, public trust and the stability of the monetary framework.
Central Bank Powers and Next Steps
The parliamentary committee examining the bill said it would review the recommendations raised during the debate.
It also indicated that information about proposed banknote samples, denominations, designs and printing arrangements would be provided to lawmakers at the appropriate stage.
The legislation remains under consideration, and the questions raised by Arab highlight the need for a clear explanation of the proposed exchange-rate provision before it is finalised.
The debate also touches on a wider policy issue: how Somalia can restore a functioning national currency while protecting the Central Bank’s role in monetary policy and maintaining confidence in the financial system.
The success of the planned currency revival will depend not only on the introduction of new banknotes but also on transparent decision-making, sound monetary arrangements and the public’s willingness to use the shilling alongside the US dollar.