SOS - Somali Shilling

Early History of the Somali Shilling

The history of the Somali Shilling dates back to 1921 when the East African Shilling was introduced in the British protectorate of Somaliland. After Somalia gained independence and unified in 1960, the two former regions, British Somaliland and Italian Somaliland, merged, and their currencies—East African Shilling and Somalo (of equal value)—were replaced by the Somali Shilling in 1962.

The initial denominations of the Somali Shilling included cents (singular: centesimo; plural: centesimi) and shillings (singular: scellino; plural: scellini), and the currency became widely circulated across the country after the unification of the two regions.

When did Somali Banknotes and Coins come into circulation?

Banknotes

On October 15, 1962, the National Bank of Somalia (Banca Nazionale Somala) issued banknotes in denominations of 5, 10, 20, and 100 shillings. In 1975, the National Bank of Somalia (Bankiga Qaranka Soomaaliyeed) issued banknotes in denominations of 5, 10, 20, and 100 shillin/shillings.

Then, in 1978, the Central Bank of Somalia (Bankiga Dhexe Ee Soomaaliya) issued banknotes with similar denominations. By 1983, the 50 shillin/shillings note was introduced, and in 1989, the 500 shillin/shillings note was introduced. It wasn't until 1990 that an effort to restructure the currency was made, with a 100:1 exchange rate, and new banknotes in denominations of 20 and 50 shillin were prepared.

Coins

Initially, the circulating coins were those of the East African Shilling and Somalo. However, in 1967, Somalia began issuing coins named the Republic of Somalia with denominations of 5, 10, and 50 cents/centesimi, along with 1 shilling/scellino. By 1976, when Somali names were introduced for the denominations, the coins were issued in denominations of 5, 10, and 50 senti, along with 1 shilling.

Fluctuations in the value of the Somali Shilling over time

Pre-War Period

Initially, the Somali Shilling was pegged to the British Pound, with an exchange rate of 20 shillings to 1 British Pound, making the Somali Shilling equivalent in value to the British Pound. However, in 1967, Somalia switched its fixed exchange rate to the US Dollar after the British Pound depreciated, setting the rate at 1 USD = 7.14286 shillings. Later, in 1971, the Somali Shilling was pegged at 1 USD = 6.57895 shillings, before being devalued by 5% in 1972 to 1 USD = 6.92522 shillings.

In the mid-1980s, Somalia began experiencing rounds of devaluation and financial crises, leading to the sharp depreciation of the Somali Shilling, especially after 1987, when the exchange rate surged to 100 shillings per 1 USD.

Post-War Period

Since the civil war began in the early 1990s, the value of the Somali Shilling has drastically fallen. After the collapse of the central government, the Central Bank of Somalia was also shut down.
Other currencies, including those from autonomous regions such as Puntland, were issued but not widely accepted. The currency market became chaotic, and the Somali Shilling lost significant value, dropping to only around 0.04 USD for every 1,000 Somali shillings.

Re-establishment and Recovery

By the late 2000s, the Federal Government of Somalia re-established the Central Bank of Somalia, the country's national monetary authority. However, the Somali Shilling had not fully recovered, and the US Dollar continued to be widely used as the primary medium of exchange.
As security improved and foreign investment increased, the Somali Shilling saw a strong recovery. In March 2014, the Somali Shilling gained 60% in value against the US Dollar in the 12 months prior.

Current Situation of the Somali Shilling

Although the Somali Shilling has partially recovered, the US Dollar remains the primary currency used in transactions within Somalia. Additionally, the Somali government is seeking to adjust its monetary policies and address inflation caused by the excessive issuance of Somali Shillings.

However, the current political stability and ongoing economic reforms are opening up new opportunities for the Somali Shilling. In the future, it may regain its important role in Somalia's economy.

The Somali Shilling has gone through a long and tumultuous history. From the difficulties during the civil war to the strong recovery in recent years, the Somali Shilling remains an integral part of Somalia’s economy. With the gradual formation of political stability, this currency may continue to grow and play a more significant role in the future.