Should Puntland print more Somali Shillings?

[Libaax-Sankataabte]

 

Generally, the economic capacity of a state such as Puntland, would be driven by revenues from 5 main areas of income:

 

Personal income taxes

Business income taxes

Sales Tax or Consumption tax

Royalty fees or revenue from government-owned natural resources or entities.

Property taxes

 

Puntland's government has failed to implement an effective tax collection or revenue generation scheme from any of the above streams. The state is close to bankruptcy. On top of that, there is little or no Shilling notes in circulation for the general economy.

 

Recently, Puntland printed boats of Somali Shillings to pay the salaries of civil servants and to increase economic activity. Insiders, fully aware of the risk of inflation, argued that the unbearable corruption in the federal government was the real reason why Puntland took these measures. Puntlanders accuse President Hassan of using the nation's coffers as his personal bank without any accountability.

 

Should Puntland continue to print more Somali shillings to kickstart its failing economy.

 

PS: Somaliland's boom is mainly driven by its ability to control is own monetary policy and print its own money at a controlled rate.

 

 

[nuune]

Libaax, have you read my recent posts about Puntland economy, the thread of Galkacyo presidential palace ayaan xarash ku qabsadey.

 

I spent there 2 months, July and August, and the state can become bankruptcy anytime now if no proper measurements are not in place, I haven't heard or seen any steps to do any efforts, the little revenue generated from the port/airports comes to the wasaarada maaliyada and ministers queue up there every morning to get their share of it, the story is long of how corruption/mismanagement is widespread there.

 

I wouldn't blame the federal government at this stage even though they are responsible of everything, it is the the Puntland admin that failed to do anything to sustain the economy.

[Che -Guevara]

Without an independent entity, preferably a central bank, that sets monetary policies, it will be futile to flood the markets with illegal notes.

[Tallaabo]

The best option Puntland has is to print its own separate currency and then peg its exchange rate to the US Dollar. This should be a temporary measure until Somalia gets a proper government and central bank. Puntland should avoid being held hostage for the failings in Mogadishu.

Also it would be better for both Puntland and Somaliland if they come to an agreement to rule out any military conflict over their political differences and then encourage trade and mutual investment between the two regions.

[Tillamook]

Libaax-Sankataabte,

 

No. Puntland should get away from using the Somali Shilling all together, and instead establish its own currency.

 

It has always been a foolish economic policy to keep the joke that is the Somali Shilling on life support for so long, especially with political disunity so rife in the country, and Garowe and Mogadishu unable to share a single unified monetary policy in this point in time.

 

I believe it would have been prudent for Puntland to establish its own currency a long time ago and I still think it isn't too late either, although some Puntlanders insist we ought to be patient and first fix what they call the "temporary" political and legitimacy problems that make the federal government in Xamar dysfunctional. They say, only then can we hope to have a decent single currency regime in the whole country that can tackle the illiquidity crisis that is crippling the Puntland economy locally.

 

Naturally, these Puntlanders are lukewarm to any calls for the demise of the Somali shilling which when viewed from their usual patriotic shortsightedness is understandable; they refuse to preside over its demise and are wary of venturing into anything that will seem anathema to Somali national unity.

 

But I condemn this for what it simply is... beerjileecnimo... and Garowe's reluctance to do a way with the Somali shilling even for a short spell--if not permanently--until Xamar gets its act together, is an abdication of their governmental responsibilities.

 

We have a big problem in Puntland and that problem is illiquidity, which I alluded to earlier. This is why a seemingly prosperous part of Somalia, endowed with abundant natural resources and hardworking people is always afflicted with constant problems of lacag la'aan iyo dhaqaalo-xumo.

 

So waiting for Culusow& co. or whoever else replaces them next year, to fix the fiscal and monetary problems affecting Puntland locally, from the federal level, is not a plausible option-- if anything, it is an unpatriotic.

 

Thus Puntland needs to mint a new currency immediately, so as to have full fiscal and monetary control over its own economy. However, this does not mean doing it the old way of just printing paper money and sneaking it into the local markets- like thieves in the night-- with no fiscal controls in place, hoping and praying that it will readily be accepted and won't lead to rampant inflation or worse.

 

For this to succeed; time, money and effort must be put in effectually studying the real level of economic activity or GDP. I'm sure if President Gaas makes it a priority it will be easy for him to do so.

 

All the economic output, whether it be goods or services must be measured thoroughly and credibly, so as to determine the level of illiquidity prevalent in the economy.

 

Once this is done, then the Puntland authorities can slowly introduce the new currency in small batches-- alongside the Somali Shilling and the Dollar already in circulation-- to slowly provide liquidity and thus lubricate the rusted mechanics of the Puntland economy.

 

Initial injections of the new Puntland currency should start with very small denominations so as to ease the problems faced by small traders who find it very difficult to provide change for small transactions such as a bus ride or a cup of tea.

 

At no time should this new currency be forced upon the people if they do not trust it. Trust must be earned and it should in the beginning be voluntarily accepted, and am confident with strict exchange rates backed by the government it will quickly be generally accepted, with encouragement and promotion of course.?

 

All government workers should be paid a portion of their salaries with this new currency at first, and then at some later date, they should get all their salaries in this new currency... with the government always ready to back it up with the Dollar, or if they so choose to get it exchanged.

 

I believe with good execution, this will quickly encourage the general public to immediately accept the new currency for all their transactions, giving the Puntland economy the much needed stimulus it so needs.

 

Also, by then we hope to have a federal government in place that is ready to resume its constitutional duties of establishing a national currency that Puntland and all other Somalis can fully and confidently stand behind.

 

Wa billahi Tawfiiq!

[ElPunto]

Talk of printing Somali Shillings misunderstands the economic reality of Puntland. The reality is that very few people use the Somali Shilling on a day to day basis. Everyone has a phone with Sahal and goods and services are exchanged in USD. And these exchanges are not done using paper money but telephonic transfers. Almost all goods and services are quoted in USD. The maids that work in people's homes are paid in USD and day labourers demand USD for their services. The economy is defacto dollarized. So the question is who will take these shillings that are being printed. No one. It will only serve to further marginalize and delegitimize the Somali Shilling.

 

There is no liquidity crisis in Puntland. There is a mismanagement crisis. For the last 25 years traders in the marketplace have regulated exchange rates and printed shillings as needed in the economy. This accounts for the remarkable resilience of the currency. Puntland needs to work within its economic reality. There are a set of revenues that must match expenses. If they don't you must cut somewhere. You would think an economist as President would understand this basic equation.

[YoniZ]

Why Puntland cant print their version of Somali shillings (100, 500, 1000, 5000) signed and distributed by the PL central bank. Instead of this stupid mass plagiarism (coloured 80gsm paper) printed in the past two decades.

 

They need to form proper monetary regulations, where PL central bank is credible institution that control the liquidity in the economy. Nominate PL central bank board of 11 members, giving half of the board members to the private sector and, link the decision making directly to the economy.

 

Once credible Federal central bank comes to light they can join it with their baggage.