Headed by Abdirahman Sheikh M. Farole, a former Puntland State President, the committee views withdrawal of excess Somali shillings, 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 the 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.
The committee urged the government to collect 20% of import-export duties in Somali shillings and pay 20% of salaries in Somali shillings.
Economists interviewed by the 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 shillings 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 the 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 in 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 shillings.
The committee expects the 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.
The 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.
This article first appeared in the © Puntland Post, 2021 and is republished with permission.