AdSense Advertisement

Somalia’s cash crisis: Decades without new banknotes leave economy strained

By The South Asia Times

SOMALIA - For more than three decades, everyday transactions in Somalia have been shaped by an unusual reality: the country has struggled to introduce new, widely circulating official banknotes since the collapse of Siad Barre’s government in 1991.

With the fall of central authority, Somalia’s monetary system fractured. The Central Bank of Somalia lost control over currency issuance, leading to a flood of counterfeit and privately printed Somali shilling notes.

Over time, the physical condition of the currency deteriorated significantly, with many notes becoming torn, patched, or heavily worn.

In some cases, local traders and shopkeepers have resorted to stitching together damaged bills to keep them usable in daily transactions.

The absence of a stable national currency has also pushed much of the economy toward dollarization. US dollars are widely accepted, particularly for large purchases, while mobile money systems have become dominant in urban areas, allowing Somalis to bypass unreliable cash altogether.

Efforts to reform the system have been ongoing. With support from international partners such as the International Monetary Fund, Somali authorities have been working toward currency reform, including plans to introduce new, secure banknotes to replace the old and counterfeit-ridden supply.

However, progress has been slow due to political fragility, security concerns, and the technical challenges of rebuilding financial institutions.

While claims that “no new banknotes have been printed” since 1991 are somewhat simplified, they reflect a deeper truth: Somalia’s currency system remains one of the most fragile in the world, where decades-old notes -- and even hand-repaired cash -- continue to underpin daily economic life.