Somali shilling

Somali shilling

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The Somali shilling is the official currency
Currency
In economics, currency refers to a generally accepted medium of exchange. These are usually the coins and banknotes of a particular government, which comprise the physical aspects of a nation's money supply...

 of Somalia
Somalia
Somalia , officially the Somali Republic and formerly known as the Somali Democratic Republic under Socialist rule, is a country located in the Horn of Africa. Since the outbreak of the Somali Civil War in 1991 there has been no central government control over most of the country's territory...

. It is subdivided into 100 senti (Somali, also سنت), cents (English) or centesimi (Italian).

Early history


The shilling
Shilling
The shilling is a unit of currency used in some current and former British Commonwealth countries. The word shilling comes from scilling, an accounting term that dates back to Anglo-Saxon times where it was deemed to be the value of a cow in Kent or a sheep elsewhere. The word is thought to derive...

 has been the currency of parts of Somalia since 1921, when the East African shilling
East African shilling
The shilling was the currency issued for use in British controlled areas in East Africa from 1921 until 1969. It was produced by the East African Currency Board...

 was introduced to the former British Somaliland
British Somaliland
British Somaliland was a British protectorate in the northern part of present-day Somalia. For much of its existence, British Somaliland was bordered by French Somaliland, Ethiopia, and Italian Somaliland. From 1940 to 1941, it was occupied by the Italians and was part of Italian East Africa...

 protectorate
Protectorate
In history, the term protectorate has two different meanings. In its earliest inception, which has been adopted by modern international law, it is an autonomous territory that is protected diplomatically or militarily against third parties by a stronger state or entity...

. Following independence in 1960, the somalo of Italian Somaliland
Italian Somaliland
Italian Somaliland , also known as Italian Somalia, was a colony of the Kingdom of Italy from the 1880s until 1936 in the region of modern-day Somalia. Ruled in the 19th century by the Somali Sultanate of Hobyo and the Majeerteen Sultanate, the territory was later acquired by Italy through various...

 and the East African shilling (which were equal in value) were replaced at par in 1962 by the Somali shilling. Names used for the denominations were cent, centesimo (plural: centesimi) and سنت (plurals: سنتيمات and سنتيما) together with shilling, scellino (plural: scellini) and شلن.

Banknotes


In 1962, the Banca Nazionale Somala issued notes for 5, 10, 20 and 100 scellini/shillings. In 1975, the Bankiga Qaranka Soomaaliyeed (Somali National Bank) 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 (Central Bank of Somalia
Central Bank of Somalia
The Central Bank of Somalia is the monetary authority of Somalia. Among other duties, it is in charge of ensuring financial stability, maintaining the internal and external value of the local currency, and promoting credit and exchange conditions that facilitate the balanced growth of the...

). 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
Somali Democratic Republic
The Somali Democratic Republic was the name that the communist regime of former President of Somalia Major General Mohamed Siad Barre gave to Somalia after seizing power during a bloodless coup d'état in 1969...

 for 5, 10 and 50 senti and 1 shiling.

Unregulation


Following the breakdown in central authority that accompanied the civil war
Somali Civil War
The Somali Civil War is an ongoing civil war taking place in Somalia. The conflict, which began in 1991, has caused destabilisation throughout the country, with the current phase of the conflict seeing the Somali government losing substantial control of the state to rebel forces...

, 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
Somaliland
Somaliland is an unrecognised self-declared sovereign state that is internationally recognised as an autonomous region of Somalia. The government of Somaliland regards itself as the successor state to the British Somaliland protectorate, which was independent for a few days in 1960 as the State of...

 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
Seigniorage
Seigniorage can have the following two meanings:* Seigniorage derived from specie—metal coins, is a tax, added to the total price of a coin , that a customer of the mint had to pay to the mint, and that was sent to the sovereign of the political area.* Seigniorage derived from notes is more...

 drove the value of the money down to about $0.04 per ShSo (1000) 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
United States dollar
The United States dollar , also referred to as the American dollar, is the official currency of the United States of America. It is divided into 100 smaller units called cents or pennies....

 was often used for larger transactions.

Somaliland shilling


The Somaliland shilling
Somaliland shilling
The Somaliland shilling is the official currency of Somaliland, a de facto independent republic which is recognized as a part of Somalia. It was introduced on 18 October 1994 at one new Somaliland shilling to 100 Somali shillings...

 is the official currency of Somaliland
Somaliland
Somaliland is an unrecognised self-declared sovereign state that is internationally recognised as an autonomous region of Somalia. The government of Somaliland regards itself as the successor state to the British Somaliland protectorate, which was independent for a few days in 1960 as the State of...

, a self-declared republic that is internationally recognized as an autonomous region of Somalia
Somalia
Somalia , officially the Somali Republic and formerly known as the Somali Democratic Republic under Socialist rule, is a country located in the Horn of Africa. Since the outbreak of the Somali Civil War in 1991 there has been no central government control over most of the country's territory...

. The currency is not recognized as legal tender
Legal tender
Legal tender is a medium of payment allowed by law or recognized by a legal system to be valid for meeting a financial obligation. Paper currency is a common form of legal tender in many countries....

 by the international community, and it currently has no official exchange rate
Exchange rate
In finance, an exchange rate between two currencies is the rate at which one currency will be exchanged for another. It is also regarded as the value of one country’s currency in terms of another currency...

. It is regulated by the Bank of Somaliland
Bank of Somaliland
The Bank of Somaliland was established in 1994. It acts as both a central bank and a commercial bank for Somaliland, a de facto independent republic which is recognized as a part of Somalia. The monetary authority was provided for in the constitution of Somaliland...

, the territory's central bank
Central bank
A central bank, reserve bank, or monetary authority is a public institution that usually issues the currency, regulates the money supply, and controls the interest rates in a country. Central banks often also oversee the commercial banking system of their respective countries...

. Although the separatist authorities in Somaliland have attempted to bar usage of the Somali shilling, Somalia's official currency is still the preferred means of exchange for many peoples in the region.

Regulation



In the late 2000s, Somalia's newly-established Transitional Federal Government
Transitional Federal Government
The Transitional Federal Government is the current internationally recognized government of the Republic of Somalia. It was established as one of the Transitional Federal Institutions of government as defined in the Transitional Federal Charter adopted in November 2004 by the Transitional...

 revived the defunct Central Bank of Somalia
Central Bank of Somalia
The Central Bank of Somalia is the monetary authority of Somalia. Among other duties, it is in charge of ensuring financial stability, maintaining the internal and external value of the local currency, and promoting credit and exchange conditions that facilitate the balanced growth of the...

. 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 US dollar
United States dollar
The United States dollar , also referred to as the American dollar, is the official currency of the United States of America. It is divided into 100 smaller units called cents or pennies....

 is widely accepted as a medium of exchange alongside the Somali shilling. Dollarization
Dollarization
Dollarization occurs when the inhabitants of a country use foreign currency in parallel to or instead of the domestic currency. The term is not only applied to usage of the United States dollar, but generally to the use of any foreign currency as the national currency.The biggest economies to have...

 notwithstanding, the large issuance of the Somali shilling has increasingly fueled price hikes, especially for low value transactions. This inflationary environment, however, is expected 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.

Historical exchange rates


Free market rates in southern Somalia:
  • 2000 SOS/USD in June 1991
  • 5000 SOS/USD in June 1993
  • 13,400 SOS/USD in March 2006
  • 14,406 SOS/USD in August 2006
  • 15,000 SOS/USD in February 2007
  • 25,000 SOS/USD in March 2008
  • 35,000 SOS/USD in July 2008
  • 28,250 SOS/USD in March 2009
  • 33,300 SOS/USD in February 2010


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