MOGADISHU — Somalia is preparing to reintroduce the Somali shilling after 35 years without issuing new domestic banknotes, as the country seeks to reclaim monetary sovereignty and end its heavy dependence on the US dollar.
The Central Bank of Somalia says preparations have reached an advanced stage, with Parliament reviewing amendments for a proposed Currency Board Arrangement while the bank finalizes regulations on reserve management and foreign exchange. The reform comes as Somalia faces tighter international support and continued security pressure from Al-Shabaab, adding urgency to efforts to strengthen domestic institutions.
The Central Bank of Somalia has prioritized the printing of new currency, with Governor Abdirahman Mohamed Abdullahi stating that Somalia’s economy has been “dollarized” for the past 30 or so years. “We cannot have a monetary policy without reintroducing the Somali Shilling,” he added. The Central Bank has since made “issuing a viable national currency and strengthening monetary policy tools” one of its strategic priorities.
Somalia’s currency crisis dates to 1991, when the collapse of Siad Barre’s government and the ensuing civil war effectively ended the central bank’s ability to issue and manage new currency. In the years that followed, counterfeit notes spread and the US dollar gradually took over commerce, savings and electronic payments, including transactions through widely used mobile-money services such as EVC Plus.
Governor Abdullahi previously assured the public in December 2021 that the Federal Government would start printing new Somali shilling notes in the coming months. His predecessor, Abdisalan Omer Hadliye, had indicated that the government had already printed new currency notes, which were reportedly lying in a warehouse in Sudan.
The dollarization was reinforced by Somalia’s large diaspora, which sends billions of dollars home through money-transfer networks such as hawala. The presence of the UN, aid organisations, foreign forces and security firms also increased demand for dollars. The International Monetary Fund estimates that approximately 98 percent of the currency circulating in Somalia was counterfeit, highlighting the scale of the monetary crisis.
Central Bank Governor Abdullahi also attended the 75th anniversary celebration of the Djiboutian Franc as the guest of honor, congratulating Djibouti on the currency’s stability and resilience over the decades.
A Currency Board at the Core
Central to the reform is the proposed currency board arrangement, a system that would maintain the new Somali shilling at a fixed exchange rate with a stable foreign currency, likely the US dollar. Under this model, each shilling in circulation must be fully backed by foreign currency reserves.
This approach is designed to provide financial stability and prevent inflation by tightly limiting the central bank’s ability to print money without the necessary foreign currency backing.
“We believe that a currency board will provide a stable and predictable policy environment to ensure confidence in the national currency across Somalia, while maintaining a dual currency regime with the U.S. dollar,” officials said in a policy memorandum.
The IMF has been providing extensive capacity development support for the currency reform and the implementation of the currency board arrangement. According to IMF documents, key milestones include amending the Central Bank Law to establish the currency board framework, creating supporting regulations including foreign exchange counterparty rules, and implementing the reforms following the physical rollout of the new currency.
Backed by technical and financial support from the International Monetary Fund, the plan has received a $10 million boost to help drive Somalia’s broader economic reforms.
Decades Without a National Currency
Decades without new banknotes have left the remaining Somali shillings badly damaged. Videos shared on social media show some Somalis binding torn and faded notes with string or rubber bands to keep them usable. Businesses in Mogadishu and other areas have increasingly refused the battered notes since April 2026, leaving some traders with savings they cannot easily spend or exchange.
In April 2026, Somalia’s Commerce Minister Jamal acknowledged the pressure, saying “there is a process underway to get new banknotes.” The Central Bank has since made “issuing a viable national currency and strengthening monetary policy tools” one of its strategic priorities.
The monetary system has also become more fragmented. Somaliland, which declared independence in 1991 but is not internationally recognised, introduced its own shilling in 1994 and continues to operate a separate currency system. “Somaliland maintains its own currency, within the context of its broader claim of independence,” explains Omar Mahmood of the International Crisis Group. “But then dollars are commonly used in that region as well.”
Challenges Ahead: Lessons from Zimbabwe
Somalia is not alone in trying to reduce dependence on the US dollar. Zimbabwe introduced the Zimbabwe Gold, or ZiG, in April 2024 after years of currency instability, although its economy remains heavily dollarised.
The IMF estimates that about two-thirds of transactions by value in Zimbabwe’s national payment system were still conducted in US dollars in 2026, underscoring how difficult it can be to rebuild confidence in a local currency after years of dollar dependence.
For Somalia, Zimbabwe’s experience shows that introducing new notes is only part of the challenge, as businesses and households must also be convinced to use them.
The currency push is also unfolding as Somalia’s relationship with Washington faces fresh pressure. The United States has said it will stop supporting UN logistical backing for the nearly 12,000-strong African Union Support and Stabilisation Mission in Somalia from 2027. Washington has also terminated Temporary Protected Status for nearly 1,100 Somalis in the US.
Critical Note
The reintroduction of the Somali shilling represents a historic step toward restoring monetary sovereignty after 35 years of dollarization. The Currency Board Arrangement, designed to provide stability and build public confidence, reflects a pragmatic approach to currency reform that acknowledges the realities of Somalia’s dollarized economy.
However, significant challenges remain. Rebuilding public confidence in a national currency after decades of dollar dependence is a formidable task. As Zimbabwe’s experience demonstrates, introducing new notes is only part of the challenge; businesses and households must be convinced to use them. The fragmented political landscape, including Somaliland’s separate currency system, complicates the reform. The success of the initiative hinges heavily on achieving political consensus between the Federal Government of Somalia and its Federal Member States, a challenging task in Somalia’s fragmented political landscape.
The government must ensure that the transition is managed transparently and that vulnerable populations, particularly those without access to dollars or mobile money platforms, are not excluded from the formal economy. Without sustained commitment to institutional reforms and public education, the risk remains that the new shilling will struggle to gain traction in a deeply dollarized economy.
