Puntland Committee for Exchange Market Crisis Issues Recommendations

Garowe (PP News Desk) — A committee appointed by Puntland Government had published a set of recommendations to deal with the currency depreciation that has had an impact on the local economy.

Headed by Abdirahman Sheikh M. Farole, a former Puntland State President, the committee views withdrawal of excess Somali shilling, believed to have caused currency depreciation, as a key monetary policy. “The Government will have to withdraw 50% of the excess Somali shilling. The business community will withdraw 50% of the excess cash” the committee recommended without specifying how to quantify what constitutes excess cash in the market. The committee urges Puntland Government and businesses to keep the Somali shilling as a legal tender. “The government bank will monitor the exchange rate, and will set the daily exchange rate” the committee recommended.

“This is the most vague recommendation that runs counter to the argument that Puntland has a free market economy” says Abdullahi Hassan, a business economist in Bosaso.

Farah Ali Shire, a former Puntland Finance Minister and a member of the the Committee for Exchange Market Crisis, briefing the media in Garowe.

The committee urged the government to collect 20% of import-export duties in Somali shilling and pay 20% of salaries in Somali shilling.

Economists interviewed by Puntland Post question what reducing the purchasing power of public service employees can do to limit the impact of the currency depreciation and unilateral demonetisation policy adopted by local businesses who view Puntland-printed Somali shilling as worthless.

The committee views the dual exchange rate in Puntland as a cause of the currency depreciation. The procurement-based exchange rate (government exchange rate in the committee’s parlance), fuels the desire of businesses to win procurement contracts from Puntland Government to overcharge for products sold to government agencies. The committee recommends the market rate as the foundation for procurement contracts.

The two remarkable recommendations pertain to licences for money changers to professionalise the sector, and the use of Puntland banks for wiring a large amount of money to other parts of Puntland instead of ferrying it across regions. The committee instructed utility companies to allow customers to pay bills in Somali shilling.

The committee expects Puntland State Government to investigate the possibility that money printed long ago but kept privately and money illegally printed in Puntland  drive currency depreciation.  “Restrictions on the minimum amount of money for mobile money transactions should be lifted” the committee recommended.

People in Garowe have welcomed the committee’s recommendations that await implementation. Puntland Government did not manage to implement recommendations that a previous committee publicised three weeks ago despite efforts to compel businesses to use the Somali shilling for transactions.

© Puntland Post, 2021