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| Last Updated: Jun 14, 2010 - 8:03:37 PM |
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Somalia: ill-advised plan to print Somali shilling
20 Jan 20, 2010 - 2:07:15 AM
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By: Liban Ahmad
The Transitional Federal Government’s ill-advised plan to print Somali shilling can undermine federalism, argues Liban Ahmad.
The agreement signed by Sudan and Somalia’s Transitional Federal Government to print Somali shilling has drawn criticism from the governor of Somalia’s central bank Bashir Isse Ali. “This move will increase the inflation rate to incredible figures. The country will be another Zimbabwe. On one hand, the leaders cannot claim they are protecting people, and become part of a plot to kill them. If you shoot them or force them to starve to death, it is the same,” Ali told Reuters. The evidence for the governor’s argument lies in the Transitional Federal Government’s decision to print Somali shilling notes of 1,000, 2,000, 5,000, 10,000 and 20,000 and 50,000 denominations. The disappearance of 500 Somali shilling banknote from the market shows the TFG has taken the current inflation into account but failed to consider future inflation in a war torn country whose business community and regional and transitional administrations have printed money between 1994 and 2008. In a study on a private money supply in Somalia published in 2003 Jamil Mubarak pointed out that printing 500 Somali shilling “ banknote [is] no longer profitable.”
Sudan News Agency reported cost of the printing Somali shilling for the TFG “will top $17 million.” From this cost one can calculate the amount of money the TFG will print. According to the Jamil’s study US$0.03 was the cost paid to print one banknote. The Transitional Federal Government will be able to inject nearly half a trillion Somali shilling into the market.
Puntland State government is not happy with the TFG’s money printing plan. “The top priorities for the TFG should have been to improve security and to rebuild public institutions through a reconciliation process, instead of plotting to flood markets with new money in a unilateral project that endangers Somali families and household” Puntland said in a press release.
Somaliland which has its own shilling and a central bank will not, like Puntland, allow the new shilling to be used in territories it controls. The whole exercise will undermine the federalism project and put third parties such as Sudan in an awful position for compromising neutrality in Somalia’s complex politics. If the TFG puts money printing plan on hold and uses consultative approach to monetary policy, then more bridges will be built between the TFG and regions keen on a federal Somalia.
If the TFG goes ahead with printing money, the new money will not be distinguishable from pre-1991 Somali shilling to avoid the fate of NA Somali Shilling printed by the former interim president of Somalia Ali Mahdi Mohamed in 1991, a money printing experiment that is a now a footnote to Somalia’s post 1990- private money supply history.
Liban Ahmad
libahm@gmail.com
Background news: Wasaaradda lacagta oo ka hadashay nooca lacagta cusub ee dowladdu sameysanayso.( Minister of revue on the plan to print Somali shiiling—TFG website)
Somali money transfer firms used to fund war: c.banker
Somalia signs currency printing agreement
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