By T. Roble
The International Monetary Fund (IMF) has given Somalia the go-ahead to source for funds to issue new bank notes noting the Horn of Africa nation will need $41 million to roll out the first phase of the currency reform process.
The global lender said in an assessment letter the Central Bank of Somalia this week, the Somalia had fulfilled the requisite measures to proceed with issuance of new currency following the completion of the first and second Staff-Monitored Programmes (SMPs) which ended April. The government is currently negotiating the third SMP.
“The authorities will need the support of the donor community to raise the needed funds, $41 million, for this project,” IMF said in a letter to the CBS. “The budget will cover the entire operation of Phase I which includes all aspects of the issuance and distribution on the new currency.”
Phase one will only cover the replacement of the existing counterfeit notes in circulation with genuine notes. The letter advises that in phase one, the CBS will only issue new small-denominations (i.e., 1,000; 2,000; 5,000; and 10,000) of Somali shilling banknotes to replace the counterfeits currently in circulation.
Injection of new Somali shilling banknotes including larger denominations, will only take place during phase II which will require significant preparatory work, including strengthening the CBS’s institutional capacity and developing independent monetary policy instruments and reserve management guidelines, the letter adds.
The CBS requested for the letter from the IMF to share with donors and mobilise funding.
A total of 752.5 million new bank notes will be printed in phase one corresponding to 1,750 billion Somali shilling notes to be exchanged.
The issuance of new notes will be a first since 1991 and will be a major milestone towards the debt relief under the HIPC Initiative.
The Fund Tuesday lauded Somalia for progress in building institutions and improving economic performance. It cited budget execution, treasury the treasury and cash management frameworks, and domestic revenue collection are improving as areas which have recorded significant progress.
Prime Minister Hassan Khaire said last week said the country was on course to pre-arrears clearance by July. Clearance of arrears owed to the IMF and World Bank is a mandatory step in the Heavily Indebted Poor Countries (HIPC) Initiative.
“It is our hope that with the support the international community is providing and the hard work and dedication of our people that we will be eligible for pre-arrears clearance funding by July 2018 in addition to the direct budget support recently announced by the European Union when I was in Brussels,” the PM said during the EU Day celebrations last week.