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Puntland unveils new currency measures as shilling suffers free-fall

Storyline:National News

By T. Roble

GOOBJOOG NEWS|PUNTLAND: Puntland has announced a new raft of measures to rescue the local currency which has experienced a free fall in the last four months trading at the low of 46,000 Somali Shillings to the US dollar.

President Abdullahi Deni ordered Saturday the ban on the US dollar for transactions of less than $10 which will now be within the strict domain of the Somali shilling. The decree ups an earlier measure that had set the restrictions on the dollar for transactions less than one dollar.

In effect, therefore, all transactions of less than $10 will be in cash as mobile companies have been instructed not to allow the functionality of mobile payments within that range. Deni also revised an order issued last month which demanded that import and export taxes be made strictly using the US dollar.

Under the new order, tax traders will now pay up to 10% of their taxes using the Somali shilling. The shilling in Puntland has suffered a major blow in recent months dropping in value against the dollar at a rate policy analysts warned could render the currency useless.

FREE-FALL

The policy think-tank SIDRA said in its report this month there was a need to inject measures both at the state and federal level to salvage the shilling from further fall.

” [The Somali Shilling] has lost more than 30 percent of its value in a matter of three weeks between August and September 2020. The exchange rate of Somali shilling to the US dollar has reached an all-time high of 46,000 SoSh per US dollar,” the report said.

The dollarization of the markets and the increased use of mobile e-money services pose an existential threat to the Somali shilling and will most likely hasten its demise, the report added urging for wide consultations on ‘the options for currency reforms and to determine whether to push for complete dollarization of the markets or issue new Somali currency to replace the current banknotes.’

Protests broke out last week in Puntland following the order on the use of the dollar in tax payments forcing the government to lower its restrictions. According to SIDRA, Puntland is the only region in the country which uses new Somali shillings which as per the Central Bank are counterfeit.

This factor has been also been attributed to the severe attrition of the local currency as the market experiences an oversupply of the shilling with the dwindling presence of the dollar.

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