By Ahmed Hundubey
In an area of globalization, protectionism and populism, the central bank plays a vital role in optimizing monetary regulations and stabilizing the economy, particularly recovering countries like ours seeking to reconstruct, develop, advance in order to delivering a tangible prosperity for all.
Besides performing the traditional activities, the central bank has to undertake responsibility of economic growth with stability in this fragile economy. In addition, Somalia does not have well-organized money and capital markets. The central bank should play a crucial role in developing the banking and financial system of the country. It should perform the following developmental and promotional functions to help the country in developing its financial institutions.
- Promote Economic Growth- It should focus on promoting the process of economic growth and ensure adequate monetary expansion in the country. Furthermore, as a banker to the government, the central bank can provide funds for initiating investment in the public sector.
- Traditional and Non-Traditional Functions– It should have the monopoly of note-issuing, acting as banker to the government, control and regulate the credit, and maintaining external stability.
- Internal Price Stability– The Central Bank should maintain internal price stability by adopting a monetary policy that can control inflationary tendencies and ensure market stability.
- Developing a Private Banking System– CBS should take measures to develop an integrated commercial banking system, but also should not miss the opportunity to directly undertake the commercial banking functions when it is necessary.
- Capacity Building– One of the most difficult challenges facing Somalia’s banking system is to develop and train staff that can manage and sustain the critical role of the institution. The CBS should establish training facilities that will help develop the skillset of the future employees.
- Expansion of the Services– In order to promote economic development throughout the country and support the different economic sectors such as agricultural, fishing, and livestock, the CBS should undertake necessary steps for branch expansion in the major cities of the country.
Moreover, central banks conduct research in the monetary system and economic activities and developments throughout the country, then publishes its finding for the common good and public consumption. This way, honest and transparency reigns supreme in the minds of its valued Somali customers hence winning public confidence and trust.
Other important roles that central bank can lead include building and developing partnership collaborations and coordination within Somali federal states for the betterment of the whole country and people. However, one also, must understand reconstructing a great Somali central bank with capacity and capability to regulate state’s currency, money supply, prevention of inflation and high unemployment, takes long time.
In the meantime, an ongoing progress should be made while adhering to optimal economic model and monetary policies that are in line with the 21st century. Once one establishes, that, one can simply device planning, implementations, evaluations, and adjusting, then repeat the cycle for continuous improvements.
Finally, Somalia has been without a strong functioning central government for the last 27 years. Therefore, the central bank should not only play a regulatory role, but also a developmental role in the country’s fragile economy. To implement these important policies, it is the responsibility of the Prime Minister’s office and the Governor of the Central Bank.
The author is an international banker and financial analyst based in Calgary, Canada
He can be reached via Hundubey.firstname.lastname@example.org