The Somali shilling is the official currency of Somalia. It is subdivided into 100 senti, cents or centesimi.
Overview
Early history
The shilling has been the currency of parts of Somalia since 1921, when the East African shilling was introduced to the former British Somalilandprotectorate. Following independence in 1960, the somalo of Italian Somaliland and the East African shilling were replaced at par in 1962 by the Somali shilling. Names used for the denominations were cent and سنت together with shilling and شلن.
Banknotes
On 15 October 1962, the Banca Nazionale Somala issued notes denominated as 5, 10, 20 and 100 scellini/shillings. In 1975, the Bankiga Qaranka Soomaaliyeed introduced notes for 5, 10, 20 and 100 shilin/shillings. These were followed in 1978 by notes of the same denominations issued by the Bankiga Dhexe Ee Soomaaliya. 50 shilin/shillings notes were introduced in 1983, followed by 500 shilin/shillings in 1989 and 1000 shilin/shillings in 1990. Also in 1990 there was an attempt to reform the currency at 100 to 1, with new banknotes of 20 and 50 new shilin prepared for the redenomination.
Coins
In terms of coins, the East African shilling and somalo initially circulated. In 1967, coins were issued in the name of the Somali Republic in denominations of 5, 10 and 50 cents/centesimi and 1 shilling/scellino. In 1976, when the Somali names for the denominations were introduced, coins were issued in the name of the Somali Democratic Republic for 5, 10 and 50 senti and 1 shilling.
Modern history
Unregulation
Following the breakdown in central authority that accompanied the civil war, which began in the early 1990s, the value of the Somali shilling was disrupted. The Central Bank of Somalia, the nation's monetary authority, also shut down operations. Rival producers of the local currency, including autonomous regional entities such as the Somaliland territory, subsequently emerged. These included the Na shilling, which failed to gain widespread acceptance, and the Balweyn I and II, which were forgeries of pre-1991 bank notes. Competition for seigniorage drove the value of the money down to about $0.04 per ShSo note, approximately the commodity cost. Consumers also refused to accept bills larger than the 1991 denominations, which helped to stop the devaluation from spiraling further. The pre-1991 notes and the subsequent forgeries were treated as the same currency. It took large bundles to make cash purchases, and the United States dollar was often used for larger transactions.
The Somaliland shilling is the official currency of Somaliland, a self-declared republic that is not internationally recognized and acts as an autonomous region of Somalia. The currency is not recognized as legal tender by the international community, and it currently has no official exchange rate. It is regulated by the Bank of Somaliland, the regions central bank and Somaliland people.
Regulation
In the late 2000s, Somalia's newly established Transitional Federal Government revived the defunct Central Bank of Somalia. In terms of financial management, the monetary authority is in the process of assuming the task of both formulating and implementing monetary policy. Owing to a lack of confidence in the Somali shilling, the U.S. dollar is widely accepted as a medium of exchange alongside the Somali shilling. Dollarization notwithstanding, the large issuance of the Somali shilling has increasingly fueled price hikes, especially for low-value transactions. The new central bank of Somalia expects this inflationary environment to come to an end as soon as the Central Bank assumes full control of monetary policy and replaces the presently circulating currency introduced by the private sector. With a significant improvement in local security, Somali expatriates began returning to the country for investment opportunities. Coupled with modest foreign investment, the inflow of funds have helped the Somali shilling increase considerably in value. By March 2014, the currency had appreciated by almost 60% against the U.S. dollar over the previous 12 months. The Somali shilling was the strongest among the 175 global currencies traded by Bloomberg, rising close to 50 percentage points higher than the next most robust global currency over the same period.
