Political sketch
Formerly British Somaliland (northern part) and Benadir or Italian Somaliland (rest of country); parts are of the country are known as Jubaland and Puntland. British Somaliland became independent from the United Kingdom on 26 June 1960; Italian Somaliland became independent from Italy on 1 July 1960 and united with the former British Somaliland as Somalia.
Intensive European exploration of Somalia began after the British occupation of Aden (now part of Yemen) in 1839. The British set up a protectorate in the north in 1884. Italy acquired two protectorates in the northeast corner of Somalia in 1889, and in 1905 it assumed responsibility for another colony on the southern part of the Somali coast. A long uprising against British and Italian rule in the early 1900s was ultimately unsuccessful. Italian Somaliland (which the Italians called simply Somalia) was incorporated as a state in the Italian East African empire in 1936, after Italy conquered Ethiopia. In 1940 the Italians invaded British Somaliland, but a year later British troops conquered all Italian-held territory in East Africa. The United Kingdom administered Italian Somaliland until 1950, when Italy resumed administration of the area as a United Nations trust territory.
Italian and British Somaliland united to became the independent Republic of Somalia on 21 October 1960. In 1969 the president was assassinated and a coup installed a military government headed by Major General Siyaad Barre. The military government attempted a kind of centrally planned economy. In 1977 Somalia invaded the Ogaden region of Ethiopia, inhabited mostly by ethnic Somalis. Ethiopia repulsed the attack. Siyaad was ousted in 1991 by an alliance of clan-based rebel groups. The country fragmented into a number of regions, each controlled by a clan or an alliance of clans. Fighting disrupted agricultural production, which was already suffering the effects of a prolonged drought; an estimated 1.5 million Somalis were threatened with starvation. Beginning in December 1992 a multinational force, led by the United States, intervened to secure food supplies. The force withdrew in 1995. At present (2005) the former British Somaliland is at peace, while the former Italian Somaliland, which contains the capital of Mogadishu, has no widely recognized leadership. Somalia's main export is livestock.
Wars since 1500
Holy Wars of the "Mad Mullah," 1899-1920 (Somali tribes against United Kingdom, Italy, Ethiopia); Second World War in East Africa, 1940-41 (Italy against United Kingdom); Ethiopian-Somali Border War, 1963-1988; Somalian Civil War of 1988-1990; Somalian Civil War of 1991-present (2005).
Convertibility
The sterling area:
(The remarks in the next two paragraphs apply to British Somaliland.) On 2 August 1914, soon after the First World War began, the United Kingdom issued a proclamation imposing a one-month moratorium of payment for bills of exchange accepted before 4 August; an act of 3 August 1914 gave legislative sanction to the proclamation. The moratorium was subsequently extended for a month and ended on 4 November 1914. Legally the pound sterling remained convertible into gold and could be exported, but the risk to shipping from German submarines made the cost of shipment prohibitive, so the United Kingdom was in effect off the gold standard. The British government refused to include private shipments of gold in its war-risk insurance scheme. After the war, the export of gold was prohibited from 1 April 1919 under regulations that were given statutory form in 1920. On 28 April 1925 the government announced that the act would not be renewed when it expired on 31 December 1925. On 13 May 1925, the United Kingdom resumed the gold standard.
The United Kingdom abandoned the gold standard on 21 September 1931. The currencies of British colonies were almost all linked to the pound sterling through currency boards; being on a sterling-exchange standard rather than a gold-exchange standard, they followed the pound sterling off gold. Over the next few years, some former British colonies (Australia, New Zealand, South Africa) and other countries that had important trade links with the United Kingdom switched from gold to the pound sterling as their official or actual anchor. The result was termed the sterling area. The United Kingdom imposed exchange controls on 4 September 1939, the day after entering the Second World War. Most countries that were not current or former British colonies soon left the sterling area. Among the remaining countries, both current- and capital-account transactions were free of restrictions within the sterling area, but were restricted in dealings with outside countries. After the Second World War, the United Kingdom returned to the gold standard under the Bretton Woods system. It removed exchange controls on 15 August 1947, but reimposed them on 20 August 1947 after suffering a large loss of foreign reserves. Sterling had a dual exchange rate from 1961 until the United Kingdom abolished exchange controls. The sterling area remained in existence because sterling was not fully convertible. It began to crumble after the United Kingdom again abandoned the gold standard on 23 June 1972. By January 1973 the sterling area had shrunk to the British Isles and a few small British colonies; even Hong Kong had abandoned sterling as its anchor currency. The United Kingdom abolished exchange controls on 24 October 1979, ending the sterling area.
Somalia alone:
When Somalia became independent on 21 October 1960 it did not at first have uniform exchange control. The former British Somaliland had been part of the sterling area, while the former Italian Somaliland apparently had not after returning to Italian administration in 1950. The former exchange controls to some extent persisted until Somalia began a uniform system for the whole country on 29 October 1964 (Somalia, Law on Foreign Economic Transactions, 7 October 1965, cited in IMF ARER 1965: 455). The former British Somaliland ceased to be part of the sterling area apparently when uniform foreign exchange controls for the whole country began, though perhaps earlier. Somalia made all imports and exports subject to licence on 1 May 1974 (IMF ARER 1975: 419).
Other
The East African Currency Board gained much of its initial circulation in 1920 by exchanging its own notes and coins for Indian rupee coins. At the time, the rupee was floating against the pound sterling, which had in effect abandoned the gold standard when the First World War broke out in 1914. The price of silver, the metal of which the rupee was made, was at a high level against the pound sterling in 1920. The East African Currency Board had not secured a promise from the government of India about the exchange rate against the pound sterling at which India would redeem rupee coins. Between the time East African Currency Board notes and coins replaced Indian rupees and the time the currency board presented the rupees to the Indian government, the price of silver fell substantially. The board incurred similar losses replacing German East African silver rupees previously circulating in Tanganyika (now the mainland of Tanzania). As a result, the East African Currency Board began its existence with foreign reserves of less than 100%, although the board maintained 100% reserves at the margin and acted in an orthodox manner. In 1925, reserves were only 43.6% of the board's East African £5.61 million of notes and coins in circulation. During the worldwide depression that began in 1929, circulation fell, hitting a low of East African £3.57 million in 1932. Reserves fell even faster, to only 9.9% in 1932. Member governments extended a guarantee of East African £1.5 million to the board to borrow pounds sterling if necessary, but the board never used the guarantee because its reserves soon began to increase as prosperity returned. Circulation increased substantially during the Second World War as British victories over Italian forces in Eritrea, Ethiopia, and Somalia resulted in the East African shilling replacing the Italian lira as currency. The foreign reserves of the currency board first reached 100% in 1950, which was also the first year the board made payments of seigniorage to member governments. British Somaliland used the East African shilling starting in 1941 but its government did not become a member of the East African Currency Board, and thus eligible to share seigniorage, until 1951. (This information comes from various issues of the East African Currency Board's annual report.)
Defaults on or restructurings of debt to the private sector (mainly from Purcell and Kaufman 1993 and Standard & Poor's 2004): None.
Banking crises (data since 1970s mainly from Caprio and Klingebiel 1999 and Frydl 1999): A crisis in 1990.
Frankel and Rose (1996) list of currency crashes: 1982, 1988.
No exchange rate data in Reinhart and Rogoff (2003).
References
Primary sources:
--Laws and decrees:
Great Britain (United Kingdom). Gazette. 1665-present. Oxford Gazette (1996-1666); London Gazette (1666-present). Oxford (1665-1666); London (1666-present): His/Her Majesty's Stationery Office from 1903. Online at <http://www.gazettes.online.co.uk>; as of September 2005, gazettes since 1900 are available.
Italy. Gazette. 1860-present. Gazzetta ufficiale del Regno (1860-1861); Gazetta ufficiale del Regno d'Italia (1861-1946); Gazzetta ufficiale della Repubblica italiana (1946-present). Turin and Florence (1860-1923); Rome (1923-present): Tip. Favale (1860-1923?); Provvidetitorato Generale dello Stato, Ministero delle Finanze (1923-1928); Istituto Poligrafico dello Statio (1928-1978); Istituto Poligrafico e Zecca dello Stato (1978-present). Online at <http://www.gazzettaufficiale.it>.
Somalia. Gazette. 1960-present. Bollettino ufficiale (1960-1969); ollettino ufficiale della Repubblica democratica somala (1969-1973, issued by Supreme Revolutionary Council, Presidency); Faafinta rasmiga ah Jamhuuriyadda Dimoqraadiga Soomaliya (1973-present, with lapses). Mogadishu: Madbacada Wawladda (1973?-?).
Somaliland (part of united Somalia). Gazette. The Northern Region Gazette (1960-?). Hargeisa. (Partial successor to the gazette of British Somaliland.)
Somaliland, British (Somaliland Protectorate). Gazette. ?-1940?, 1941?-? Somaliland Protectorate Gazette (?-1940?, 1941?-1960); The Somaliland Gazette (1960-1960). Hargeisa. (Succeeded by the gazette of united Somalia and a regional gazette for Somaliland.)
Somaliland, Italian (in Italian, Somalia). Gazette. ?-1941, 1946-1960. Bollettino ufficiale della Somalia italiana e foglio d'ordinari e comunicazionei del R. governo della Somalia italiana (?-1941?, issued by Direzione del Personale e Affari Generali); apparently no gazette 1941-1946; The Somalia Gazette (1946-1950, issued by British Military Administration); Bollettino ufficiale dell'Amministrazione ficuciaria italiana della Somalia (1950-1960). Mogadishu. (In between these two periods, Italian Somaliland was under British administration. After the second period, succeeded by the gazette of united Somalia.)
--Publications of monetary authorities:
Banca d'Italia. Annual report. 1895-present. Adunanza generale ordinaria e straordinaria degli azionisti ... (1895-1935); Adunanza generale ordinaria dei partecipanti ... (1936-1950); Assemblea generale ordinaria dei partecipanti ... (1951-present). Rome: Tipografia della Banca d'Italia (1895-1950); Banca d'Italia, Centro Stampa (1951-present). An abridged English version is available from at least 1933 (Abridged Translation of the Report of the Governor at the Annual General Meeting of the Shareholders Held in Rome on the ... [1933-1939]; no English version 1940-1951; Abridged Version of the Report for the Year ... Presented at the Ordinary General Meeting of Shareholders Held in Rome on ... [1952-1964]; Abridged Version of the Report for the Year ... Presented by the Governor at the Ordinary General Meeting of Shareholders Held in Rome on ... [1965-1983]; Ordinary General Meeting of Shareholders Held in Rome on ...; Abridged Report for the Year ... [1984-present]).
Banca Nazionale Somala (Somali National Bank). Annual report. 1960/1961-1973. Relazione e bilancio / Report and Balance Sheet (1960/1961-1968); Report and Accounts (1969-1972?); Annual Report and Statement of Acocunts (1973). Mogadishu: Banca Nazionale Somala (Somali National Bank).
Banca Nazionale Somala (Somali National Bank). Bulletin. 1965-1974. Bulletin (Italian Bollettino, Somali Faafin; in Italian and English 1965-1972, Somali and English 1972-1974). Mogadishu: Banca Nazionale Somala (Somali National Bank).
Bankiga Dhexe Ee Soomaaliya (Central Bank of Somalia). 1974-1988? Annual Report and Statement of Accounts. Mogadishu: Bankiga Dhexe Ee Soomaaliya (Central Bank of Somalia). (I have seen no reports since 1988.)
Bankiga Dhexe Ee Soomaaliya (Central Bank of Somalia). Bulletin. 1974-1988? Bulletin (Somali Faafin; in Somali and English). Mogadishu: Bankiga Dhexe Ee Soomaaliya (Central Bank of Somalia).
Cassa per la Circolazione Monetaria della Somalia. 1950/1951-1960. Annual report. Assemblea generale ordinaria degli azionisti (1950/1951-1953?); Bilancio (1954?-1960). Rome: Istituto Poligrafico dello Stato.
East African Currency Board. Annual report. 1920/1921-1971/1972. Report of the East African Currency Board for the Year ending 30th June... (1920/1921-1959); Report for the Year Ended 30th June ... (1961/1962-1970/1971); The Final Report of the East African Currency Board (1971/1972). London: Waterlow and Sons (1920/1921-1958/1959); Nairobi: Government Printer, Kenya (1959/1960-1964/1965), Printing and Packaging Corporation (1965/1966-1970/1971); East African Currency Board (1971/1972).
--Web site of the current monetary authority (viewed 20 September 2005):
Apparently none.
--Other publications or Web sites:
Great Britain (United Kingdom). Colonial Office. Report on British Somaliland. 1920s?-1938?, 1948-1958. Report of the Somaliland Protectorate (1920s?-1938?); Annual Report on the Somaliland Protectorate for the Year ... (1948-1958). London: His/Her Majesty's Stationery Office.
Italy. Ministero degli Affari Esteri. Report on Italian Somaliland. 1950-1959 Rapport du gouvernement italien à l'Assemblée Générale des Nations Unies sur l'administration de la Somalie placée sous la tutelle de l'Italie. Rome: Ministry of Foreign Affairs. Rome: Ministero degli Affari Esteri.
Main secondary sources:
Banca d'Italia. 1940. La Banca d'Italia nelle terre d'oltremare. Rome: Istituto Poligrafico dello Stato.
Banca Nazionale Somala (Somali National Bank). 1962. Report and Balance Sheet (Financial Year: 1st July, 1960 to 31st December, 1961). Mogadishu: Somali National Bank. (Contains an account of the recent monetary history of Somalia. Rodd [1948] and Somali National Bank [1962] seem to contradict one another on certain points.)
Dalmar Abdirahman, Mohammed. 1998. Exchange Rate Policy 1960-1990: The Experience of Somalia. Ottawa: Privately printed. Also another edition 2005, Bloomington, Indiana: AuthorHouse. Online at <http://www.somaliawatch.org/archivejuly/000812602.htm>, viewed 4 December 2005.
Gill, Denis. 1991. The Coinage of Ethiopia, Eritrea and Italian Somalia. Garden City, New York: Dennis Gill.
Hunt, John A. 1951. A General Survey of the Somaliland Protectriate, 1944-1950. Hargeisa.
IMF ARER. 1950-present. International Monetary Fund. Annual Report on Exchange Restrictions (1950-1978), Annual Report on Exchange Arrangements and Exchange Restrictions (1979-1988), Exchange Arrangements and Exchange Restrictions: Annual Report (1989-present). Washington: International Monetary Fund. (Contains information on IMF member countries and some of their dependencies.)
Mubarak, Jamil A. 2002. "A Case of Private Money Supply in Stateless Somalia." Journal of African Economies, v. 11, no. 3, September: 309-25.
Rodd, [Baron] F[rancis] J[ames] Rennell [Lord Rennell of Rodd]. 1948. British Military Administration of Occupied Territories in Africa During the Years 1941-47. London: His Majesty's Stationery Office. (Concerns in particular Eritrea, Ethiopia, Libya, and Somalia. Rodd [1948] and Somali National Bank [1962] seem to contradict one another on certain points.)
Tuccimei, Ercole. 1999. La Banca d'Italia in Africa: introduzione all'attività dell'Istituto di emissione delle colonie dall'età crispina alla seconda guerra mondiale. Rome: Laterza. (Concerns Italian colonies.) (I have not seen this.)
Tyson, Geoffrey William. 1963. 100 Years of Banking in Asia and Africa, 1863-1963. London: National and Grindlays Bank. (A history of the National Bank of India and Grindlays Bank, which merged to form National and Grindlays Bank.)
World Currency Yearbook. 1984-1990/93. Brooklyn, New York: International Currency Analysis. Previously called Pick's Currency Yearbook (1955-1979) and Pick's World Currency Report (1980-84). New York: Pick Publishing Corporation.
Monetary authorities: Italian Somaliland and united Somalia
| Dates | Type | Name | Source | Remarks |
| 1893 | privately issued notes | V[incenzo] Filonardi & Co., Mogadishu (headquarters Itala [el-Athaleh], Somalia) | possibly Italy, contract with V. Filonardi & Co., 15 May 1893, cited in Gill (1991: 318) | These notes were only issued briefly, but they circulated for some time afterwards. Vincenzo Filonardi was an Italian diplomat who brought Italian domination to Somalia. This episode cannot really be called free banking because Filonardi's company was not a full-fledged bank. Coins had been minted in Somalia since the 1300s; the first coins under Italian rule were issued in 1909 (Italy, decree of 29 January 1909). |
| 1893
-7 December 1910 |
coins only | Maria Theresa silver thaler, Indian rupee, and (Italian) Eritrean tallero | Gill (1991: 318) | V. Filonardi & Co. ceased issuing notes. |
| 8 December 1910
-14 November 1920 |
dollarization (another type) (no banks) | "Italian rupee" | Banca Nazionale Somala annual report 1960/1961: 147 | The Indian rupee was widely used in international trade. Besa coins (also called pice, equal to 1/64 rupee) were issued in 1909 at 150 besa = 1 silver Maria Theresa thaler, "Italian rupees" for Somalia were issued on 8 December 1910. |
| 15 November 1920
-30 June 1925 |
dollarization (as part of a currency union) | Italian lira cash certificates (issued by central bank Banca d'Italia [headquarters Rome, Italy]) and local cash certificates | Italy, Decree No. 600, 13 May 1920, cited in Banca d'Italia (1940: 93) | The Banca d'Italia, the first durable bank, opened a branch in Mogadishu on 15 November 1920. The branch issued cash certificates (buoni di cassa). The second bank was the Cassa di Risparmio di Torino (headquarters Turin, Italy), which opened an office in Mogadishu in 1932. It withdrew in 1938 and the Banco di Napoli (headquarters Naples, Italy) took its place (Banca Nazionale Somala annual report 1960/1961: 164-5). |
| 1 July 1925
-March 1941 |
central bank (with commercial banking functions) (as part of a currency union) | Italian lira (issued by central bank Banca d'Italia [headquarters Rome, Italy]) | Italy, Decree No. 1143, 18 June 1925, cited in Banca Nazionale Somala annual report 1960/1961: 147 | The Banca d'Italia issued Italian lira notes from its Mogadishu branch. It was reduced to pure central banking business in Italy in 1938 but was allowed to continue commercial banking overseas (Italy, Law No. 141, 7 March 1938; Law No. 636, 7 April 1938, cited in Banca Nazionale Somala annual report 1960/1961: 165). The Banca d'Italia made special issues of lira notes for Italy's East African colonies dated from 14 June 1938-14 January 1939 (Italy, act of 8 August 1938, cited on the notes themselves). |
| March 1941
-21 May 1950 |
dollarization (as occupation currency) | East African shilling (issued by East African Currency Board [headquarters London, England]); Italian lira continued to be accepted with limits | United Kingdom, Occupied Enemy Territory Administration, Proclamation No. 3, 2 March 1941; Proclamation No. 4, 21 March 1941, cited in Banca Nazionale Somala annual report 1960/1961: 148 | The British army introduced the East African shilling when it conquered Italian Somaliland during the Second World War. Barclays Bank (Dominion, Colonial and Overseas) opened a branch in Mogadishu on 8 March 1943 to serve the occupaion forces (Rennell Rodd 1948: 393). |
| 22 May 1950
-5 April 1959 |
currency board-like | Cassa per la Circolazione Monetaria della Somalia (headquarters Rome, Italy) | Italy, incorporation of Cassa per la Circolazione Monetaria della Somalia, 18 April 1950, reprinted in Cassa per la Circolazione Monetaria della Somalia annual report 1950/1951: 75-7; Italy, Law No. 677, 30 June 1954, cited in Banca Nazionale Somala annual report 1960/1961: 152 | Italy regained control of Italian Somaliland as a United Nations trusteeship territory and established a currency board based in Rome. There was a coordinate "Banking Department" of the Banca d'Italia in Mogadishu, making the monetary system as a whole currency board-like rather than an orthodox currency board. The Cassa per la Circolazione Monetaria della Somalia issued notes as well as coins. It was required to hold 100% foreign-exchange reserves except against coins for less than 1 Somali somalo, for which no reserve requirement existed. |
| 6 April 1959
-30 June 1960 |
central bank (for Italian Somaliland only) | Cassa per la Circolazione Monetaria della Somalia (headquarters Mogadishu, Somalia) | Italy, Decree No. 1311, 2 December 1958, cited in Banca Nazionale Somala annual report 1960/1961: 153 | The currency board was converted into a central bank, and the headquarters moved from Rome to Mogadishu, where it took over the functions of the local branch of the Banca d'Italia. |
| 1 July 1960
-1961 |
central bank (for former Italian and British areas of Somalia) | Bankiga Dhexe Ee Soomaaliya (Somali National Bank or Banca Nazionale Somala) (headquarters Mogadishu, Somalia) | Somalia, Decree Law No. 3, 30 June 1960, reprinted in Banca Nazionale Somala annual report 1960/1961: 274-82 | Established a national central bank shortly before Italian and British Somaliland became independent as a single country. Somalia joined the IMF on 31 August 1962. |
| 1961
-31 December 1970 |
central bank (with commercial banking functions) | Bankiga Dhexe Ee Soomaaliya (Somali National Bank or Banca Nazionale Somala) (headquarters Mogadishu, Somalia) | Somalia, Decree Law No. 3, 30 June 1960, reprinted in Banca Nazionale Somala annual report 1960/1961: 274-82; also pp. 229-37 of the same report | The government-owned Credito Somalo was merged with the Somali National Bank at the end of December 1968 (Banca Nazionale Somala annual report 1960/1961: 57). Foreign banks were nationalized and absorbed by the Somali National Bank in May 1970 (Somalia, Law No. 26, 7 May? 1960, cited in IMF ARER 1971: 371). Somalia, Decree-Law No. 6, 19 October 1968 (cited in Banca Nazionale Somala annual report 1968: 14; see also p. 23) eliminated the requirement that the central bank hold foreign reserves equal to at least 100% of currency in circulation. No similar requirement ever existed for the central bank's deposit liabilities. |
| 1? January 1971
-1994 |
central bank | Bankiga Dhexe Ee Soomaaliya (except 1972-1974, when it was called Bankiga Qaranke Somailiyeed) (Somali National Bank or Banca Nazionale Somala to 1973 / Central Bank of Somalia from 1974) (headquarters Mogadishu, Somalia) | IMF ARER (1972: 378) | The central bank spun off its commercial banking functions. It is unclear whether the banking system functioned as a monobank for a time in the 1970s. |
| 1994
-present (2005) |
central bank alongside local issuers (see Remarks) | Bankiga Dhexe Ee
Soomaaliya (Central
Bank of Somalia)
(headquarters Mogadishu, Somalia) alongside other issuers (see Remarks) |
new reports | After the central government collapsed and civil war broke out in 1991, the central bank ceased printing notes and became dormant. Somaliland (formerly British Somaliland), in the northwest, declared itself independent in 1994 and issues its own currency, the Somaliland shilling, through the Central Bank of Somaliland (Baanka Somaliland, headquarters Hargeisa, Somaliland). Puntland, in the northeast, declared itself autonomous in 1998 and has its own State Bank (headquarters Boossaaso, Puntland). In southern Somalia, warlords have issued copies of pre-1991 Somali shillings and in one case a distinctive currency (Mubarak 2003: 318). |
Monetary authorities: British Somaliland / Somaliland
| Dates | Type | Name | Source | Remarks |
| 1887
-17 August 1940 |
coins only | Indian rupee (issued by Indian government [headquarters New Delhi, India] / issued by central bank Reserve Bank of India [headquarters Bombay (now Mumbai), India from 1 April 1935]) | administratively, British Somaliland was initially subject to certain Indian laws, including currency laws | British Somaliland was proclaimed a British protectorate in 1887. The colony had no commercial banks in this period. A Government Savings Bank was established in Hargeisa in 1930 (Banca Nazionale Somala annual report 1960/1961: 164). |
| 18 August 1940
-about 30 April 1941 |
dollarization (as occupation currency) | Italian lira (issued by central bank Banca d'Italia [headquarters Rome, Italy]) | Banca Nazionale Somala annual report 1960/1961: 164; Gill (1991: [page to come]) | Italian occupation forces introduced an East African issue of the Italian lira during the Second World War. The first commercial bank was the Banca d'Italia, in Hargeisa, 1940; it closed when the Italian occupation ended. |
| about 30 April 1941
-30 September 1951 |
coins only | Indian rupee (issued by Indian government [headquarters New Delhi, India] / issued by central bank Reserve Bank of India [headquarters Bombay (now Mumbai), India] from 1 April 1935) and East African shilling (issued by East African Currency Board [headquarters London, England]) | perhaps United Kingdom, Occupied Enemy Territory Administration, Proclamation No. 3, 2 March 1941; Proclamation No. 4, 21 March 1941, cited in Banca Nazionale Somala annual report 1960/1961: 148 | The British reconquered the colony from the Italians during the Second World War. |
| 1 October 1951
-30 June 1960 |
joint currency board (as part of a currency union) | East African Currency Board (headquarters London, England) | British Somaliland, Ordinance No. 16 of 1951, cited in East African Currency Board annual report, 30 June 1952: 4 | British Somaliland joined the East African Currency Board. The board's coins were the first quasi-local coinage. The first permanent commercial bank was the National Bank of India (headquarters London, England), in Hargeisa, in March 1952 (Tyson 1963: 222). British Somaliland united with Italian Somaliland to form independent Somalia on 1 July 1960; for its subsequent history, see above. The currency board issued coins as well as notes. |
| 1956
-30 June 1960 |
joint currency board-like (as part of a currency union) | East African Currency Board (headquarters London, England) | United Kingdom, Secretary of State for the Colonies, Regulations Defining the Constitution, Duties and Powers of the East African Currency Board, as Revised and Approved on 16th September 1955, 16 September 1955, reprinted in East African Currency Board annual report, 30 June 1955: 10-11 | The East African Currency Board was allowed to hold up to East African £10 million in local securities, which at the time was equal to roughly 15% of its notes and coins in circulation. The maximum was raised to East African £20 million in 1957 (United Kingdom, Secretary of State for the Colonies, Regulations Defining the Constitution, Duties and Powers of the East African Currency Board, as Revised and Approved on the 23rd December, 1957, 23 December 1957, reprinted in East African Currency Board annual report, 20 June 1958: 8). The board made partial use of these powers. |
| 1 July 1960
-1994 |
central bank / central bank (with commercial banking functions) from 1961 / central bank from 1 January 1971 (all as part of a currency union) | Bankiga Dhexe Ee Soomaaliya (except 1972-1974, when it was called Bankiga Qaranke Somailiyeed) (Somali National Bank or Banca Nazionale Somala to 1973 / Central Bank of Somalia from 1974) (headquarters Mogadishu, Somalia) | Somalia, Decree Law No. 3, 30 June 1960, reprinted in Banca Nazionale Somala annual report 1960/1961: 274-82 | Established a national central bank shortly before Italian and British Somaliland became independent as a single country. The East African shillling continued to circulate in the former British Somaliland as legal tender through 25 June 1961. The Somali National Bank ceased functioning for a time after civil war broke out in 1991. |
| 1994
-present (2005) |
own central bank | Central Bank of Somaliland (headquarters Hargeisa, Somaliland) | Mubabak (2003: 318) | Somaliland (formerly British Somaliland), declared itself independent in 1994 and issues its own currency, the Somaliland shilling. Information is scarce. |
Exchange rate arrangements: Italian Somaliland and united Somalia
| Dates | Official arrangement | Source | Unofficial arrangement, if different | Remarks |
| 1889
-7 December 1910 |
fixed; used Maria Theresa thaler, Indian rupee, (Italian) Eritrean tallero | Banca Nazionale Somala annual report 1960/1961: 146 | Italian colonization began in 1889. Italy tried and failed to replace the silver Maria Theresa thaler with its Eritrean tallero. Use of the Maria Theresa thaler in domestic payments was officially prohibited in 1916, but the law had little effect on practice. In 1905, Italy introduced coins for small change at 150 Italian centisimi = 1 Maria Theresa thaler. The episode of note issuance by V[incenzo] Filonardi & Co. was so fleeting that I do not count it as breaking the period of the fixed exchange rate. | |
| 8 December 1910
-18 September 1919 |
fixed; 1 "Italian rupee" = 1 Indian rupee = 1.68 Italian lire | Banca Nazionale Somala annual report 1960/1961: 147 | The Indian rupee was widely used in international trade. Besa coins (also called pice, equal to 1/64 rupee) were issued in 1909 at 150 besa = 1 silver Maria Theresa thaler (Italy, decree of 29 January 1909, cited in Banca Nazionale Somala annual report 1960/1961: 147). "Italian rupees" for Somalia were issued on 8 December 1910; they were subdivided into 100 besa, hence a decimal currency. The cross rate with the pound sterling was 15 "Italian rupees" = UK£1. | |
| 19 September 1919
-30 June 1925 |
fixed; 1 "Italian rupee" = 1.68 Italian lire | Italian Somaliland (Somalia), governor's decree of 19 September 1919, cited in Banca Nazionale Somala annual report 1960/1961: 147 | The "Italian rupee" ceased being linked to the Indian rupee, which was undergoing fluctuations relative to the Italian lira. | |
| 1 July 1925
-13 June 1938 |
fixed; used Italian lira | Italy, Decree No. 1143, 18 June 1925, cited in Banca Nazionale Somala annual report 1960/1961: 147 | Switched to the Italian lira as the local currency. Italian rupees and Banca d'Italia cash certificates in rupees ceased circulating on 30 June 1926. They were withdrawn at 8 "Italian rupees" = 1 Italian lira. The Italian lira was a decimal currency. | |
| 14 June 1938
-March 1941 |
fixed; 1 local lira = 1 Italian lira | Italy, act of 8 August 1938, cited on the notes issued by the Banca d'Italia | The Banca d'Italia made special issues of lira notes for Italy's East African colonies dated from 14 June 1938-14 January 1939. | |
| March 1941
-31 June 1942 |
fixed; 24 local lira = 1 East African shilling | United Kingdom, Occupied Enemy Territory Administration, Proclamation No. 3, 2 March 1941; Proclamation No. 4, 21 March 1941; Order No. 1, 24 March 1941; all cited in Banca Nazionale Somala annual report 1960/1961: 148 | The British army introduced the East African shilling when it conquered Italian Somaliland during the Second World War. The lira could still be used, but the British military government did not accept it for amounts exceeding 40 East African shillings (= UK£2). | |
| 1 July 1942
-21 May 1950 |
fixed; used East African shilling | United Kingdom, Occupied Enemy Territory Administration, Proclamation No. 20, 1 July 1942, cited in Banca Nazionale Somala annual report 1960/1961: 148 | The lira continued to be accepted for some payments, but with more restrictions than before. The East African shilling was equal to the UK shilling. There was also a unit of account called the East African pound, equal to the pound sterling. Unlike the pound sterling or UK shilling, the East African shilling was a decimal currency. | |
| 22 May 1950
-25 June 1961 |
pegged; 20 Somali somali = UK£1, or 1 Somali somalo = 0.124414g gold | Somalia Trusteeship Administration, Ordinance No. 14, 16 May 1950, reprinted in Cassa per la Circolazione Monetaria della Somalia annual report 1950/1951: 85-6 | Italians returned as United Nations trustees and introduced the somalo, equal to the East African shilling. The plural of somalo is somali. The name of the currency came from the Italian word for "Somali." Currencies other than the somalo ceased to be legal tender on 22 August 1950 (Somalia Trusteeship Administration, Ordinance No. 17, 16 May 1950; Order No. 45, 20 July 1950; both reprinted in Cassa per la Circolazione Monetaria della Somalia annual report 1950/1951: 98-100). The currency was issued by a currency board-like monetary authority, so the exchange rate changed from fixed to pegged. | |
| 26 June 1961
-29 December 1965 |
pegged; 20 Somali shillings = UK£1, or 1 Somali shilling = 0.124414g gold | Somalia, Decree Law No. 3, 30 June 1960; Decree Law No. 2, 6 March 1961, converted into Law No. 13, 23 May 1961; Presidential Decree NO. 143, 15 June 1961; all reprinted in Banca Nazionale Somala annual report 1960/1961: 274-82, 287-9, 197 | The Somali shilling replaced the Somali somalo as the unit of account in Italian Somaliland. The name of the currency came from the UK shilling. Initially the change was just a change of name. Somalo notes continued to circulate until the first issue of Somali shilling notes was put into circulation on 15 December 1962 (Banca Nazionale Somala annual report 1962: 169). Somalia registered a gold parity with the IMF on 14 June 1963. | |
| 30 December 1965
-30 December 1967 |
pegged, dual rate; official rate 20 Somali shillings = UK£1, or 1 Somali shilling = 0.124414g gold | IMF ARER (1966: 480) | Established an exchange rate tax of 3% for most foreign-exchange transactions. | |
| 1 January 1967
-17 November 1967 |
pegged; 20 Somali shillings = UK£1, or 1 Somali shilling = 0.124414g gold | IMF ARER (1968: 372) | Reduced the exchange rate tax to 1.5%, thus unifying the exchange rate by my definition (the spread between official buying and selling rates was less than 2%). | |
| 18 November 1967
-31 December 1967 |
pegged, dual rate; official rate 7.14286 Somali shillings = US$1, or 1 Somali shilling = 0.124414g gold | news reports | Did not follow the devaluation of the pound sterling on 18 November 1967. Over time, the central bank switched its foreign assets from pounds sterling to US dollars. | |
| 1 January 1968
-27 August 1971 |
pegged; 7.14286 Somali shillings = US$1, or 1 Somali shilling = 0.124414g gold | IMF ARER (1969: 405) | Abolished the exchange rate tax. The Somali government closed the foreign-exchange market on 18 August 1971 and allowed it to reopen on 28 August 1971 (IMF ARER 1972: 378). | |
| 28 August 1971
-22 December 1971 |
pegged, 1 Somali shilling = 0.124414g gold (nominally) (see Remarks) | IMF ARER (1972: 378) | Gold convertibility for all countries ended in practice when the United States abandoned the gold standard on 15 August 1971. Somalia used gold rather than the US dollar as its nominal anchor, but the Somali shilling was not freely convertible into gold at a pegged rate. On 28 August 1971 the central bank kept its selling rate for the US dollar unchanged but announced a new buying rate, in effect appreciating the currency. The Somali government closed the foreign-exchange market on 20 December 1971, after the devaluation of the US dollar on 18 December 1971, and allowed the market to reopen on 23 December 1971. | |
| 23 December 1971
-8 January 1972 |
pegged; 6.57895 Somali shillings = US$1, or 1 Somali shilling = 0.124414g gold (nominally) | IMF ARER (1972: 378) | In effect repegged to the US dollar after the United States devalued the dollar against gold on 18 December 1971. | |
| 9 January 1972
-31 May 1972 |
pegged; 6.9252 Somali shillings = US$1, or 1 Somali shilling = 0.124414g gold (nominally) | IMF ARER (1973: 417) | Devalued against the US dollar and adopted wider margins in principle. In practice, the buy-sell spread was zero until 5 July 1972, when it became 6.9257-7.1810 Somali shillings = US$1. | |
| 1 June 1972
-24 June 1972 |
pegged; 6.9252 Somali shillings = US$1, or 1 Somali shilling = 0.1118193g gold (nominally) | IMF ARER (1973: 417) | Dalmar Abdirahman (1998) implies that a black market existed by this period. | Gold rate officially replaced the US dollar as the anchor, but in practice the link to gold was merely notional. The foreign-exchange market closed on 24 June 1972, after the United Kingdom floated the pound sterling on 23 June 1972; the market reopened the next day. |
| 25 June 1972
-4 July 1972 |
pegged, multiple rates; official rate 6.9252 Somali shillings = US$1, or 1 Somali shilling = 0.1118193g gold (nominally) | IMF ARER (1973: 417) | The central bank applied spreads of +/-10% on either side of the parity rate for the currencies it quoted. The spread applied to all trade transactions, but where circumstances warranted, adjustments could be made to compensate buyers and sellers of foreign exchange. For sales and purchases of foreign exchange related to travel, the spread was +/-5% with no possibility of readjustment. Dalmar Abdirahman (1998) says spreads in practice ranged from 2.3-4.5%. | |
| 5 July 1972
-23 February 1973 |
pegged; 6.9252 [recheck IMF ARER 1973, p. 415 or so] Somali shillings = US$1, or 1 Somali shilling = 0.1118193g gold (nominally) | IMF ARER (1973: 417) | The central bank narrowed its dealing spreads. The spread for the US dollar was 6.9251-7.1810 Somali shillings = US$1. | |
| 24 February 1973
-31 March 1978 |
pegged, dual rate; official rate 6.23272 Somali shillings = US$1, or 1 Somali shilling = 0.1118193g gold (nominally) | Banca Nazionale Somala annual report 1973: 2; IMF ARER (1973: 381) | In 1976 the government introduced a "franco valuta" scheme that gave importers who obtained foreign exchange abroad, say from Somali expatriates, automatic permission to use the funds for imports. It was a partial recognition of the parallel market (Dalmar Abdirahman 1998). | Did not follow the devaluation of the US dollar on 13 February 1973. The IMF notes the reappearance of a dual exchange rate in 1973; I have made a guess and placed it here. |
| 1 April 1978
-1980 |
pegged, dual rate; official rate 6.23272 Somali shillings = US$1 | International Monetary Fund, Board of Governors, Resolution No. 31-4, 30 April 1976 ("Second Amendment") | The parallel market continued (Dalmar Abdirahman 1998). | The system of gold par values officially ended by agreement of IMF members. |
| 1980
-30 June 1981 |
pegged; 6.23272 Somali shillings = US$1 | IMF ARER (1981: 368, 473) | The parallel market continued (Dalmar Abdirahman 1998). | IMF ARER omits mention of any dual exchange rate in 1980. |
| 1 July 1981
-30 June 1982 |
pegged, dual rate; official rate 6.295 Somali shillings = US$1 | Central Bank of Somalia annual report 1982: 37 | The parallel market continued (Dalmar Abdirahman 1998). | Established a depreciated second rate, 12.4654-12.7146 Somali shillings = US$1, for all transactions other than imports of specified essential commodities |
| 1 July 1982
-31 December 1982 |
pegged to rigid basket; 16.50 Somali shillings = 1 SDR | Central Bank of Somalia annual report 1982: 37-8 | In practice, pegged; 15.2072 Somali shillings = US$1. | Switched to the SDR as the official anchor currency and unified the exchange rate. The margin of flucutation with the SDR was +/-2.25%. The US dollar remained the intervention currency and the anchor in practice. |
| 1 January 1983
-30 June 1983 |
band to rigid basket, dual rate; official rate 16.50 Somali shillings = 1 SDR | IMF ARER (1984: 431) | Established a premium rate to attract inflows from Somalis abroad. The premium rate was the official rate, converted into US dollars, plus 5 Somali shillings per US dollar. | |
| 1 July 1983
-14 September 1984 |
band to rigid basket, dual rate; official rate 16.50 Somali shillings = 1 SDR, +/-7.5% | Central Bank of Somalia annual report 1983: 32; IMF ARER (1984: 431) | World Currency Yearbook (1986-1897: 162) shows a parallel market rate of 22.10 Somali shillings = US$1 at the end of 1983, the first data poin it shows. | The widening of the bands allowed a temporary revaluation against the US dollar. Within the wide bands, there were indicative bands of +/-2.25%. The exchange rate was adjusted by the difference in inflation between Somalia and the countries in the currency basket, with the aim of maintaining export competitiveness. |
| 15 September 1984
-31 December 1984 |
band, dual rate; official rate 26 Somali shillings = US$1, +/-7.5% | IMF ARER (1985: 444) | World Currency Yearbook (1986-1987: 162) shows a parallel market rate of 30 Somali shillings = US$1 at the end of 1984. | Before devaluation, the exchange rate had been 17.5556 Somali shillings = US$1. |
| 1 January 1985
-31 January 1985 |
pegged, dual rate; official rate 36 Somali shillings = US$1 | IMF ARER (1986: 460) | The second official exchange rate was apparently an independent float. The parallel rate was 40-55 Somali shillings = US$ (World Currency Yearbook 1988-1989: 167). World Currency Yearbook's monthly parallel market data begin in January 1985. | Abolished the premium rate mentioned above, but established a new, freely floating second exchange rate. |
| 1 February 1985
-1 November 1985 |
pegged, dual rate; official rate 40.6083 Somali shillings = US$1 (see Remarks) | IMF ARER (1986: 460) | The second offiical exchange rate was apparently an independent float. The parallel rate was 47-72 Somali shillings = US$ (World Currency Yearbook 1988-1989: 167). | Adjusted the official exchange rate in steps from February 1 to June 30, attaining this final rate. |
| 2 November 1985
-31 December 1985 |
pegged, dual rate; official rate 42.50 Somali shillings = US$1 | IMF ARER (1986: 460) | The second official exchange rate was apparently an independent float. The parallel rate was 84-105 Somali shillings = US$ (World Currency Yearbook 1988-1989: 167). | Devalued. |
| 1 January 1986
-31 August 1986 |
crawling peg?, dual rate (IMF: adjusted according to a set of indicators) | IMF ARER (1987: 447) | The second official exchange rate was apparently an independent float. The parallel rate was 120-175 Somali shillings = US$ (World Currency Yearbook 1988-1989: 167). | Devalued in steps from 54.50 Somali shillings = US$1 at start of 1986 to 90.50 Somali shillings = US$1 at end of 1986. A third exchange rate was introduced |
| 1 September 1986
-15 June 1987 |
crawling peg?, multiple rates (IMF: adjusted according to a set of indicators) | IMF ARER (1987: 447) | Both the second ("free") and third ("auction") official exchange rates were apparently independent floats. The parallel rate was 180-280 Somali shillings = US$ (World Currency Yearbook 1988-1989: 167). | A fortnightly auction of foreign-exchange credits from the World Bank's International Development Association generated a thrid exchange rate. |
| 16 June 1987
-11 October 1987 |
independent float | IMF ARER (1988: 437) | In practice, the official rate may have been a crawling peg. The parallel rate was 163-180 Somali shillings = US$ (World Currency Yearbook 1988-1989: 167). | Unified the exchange rate. The IMF's International Financial Statistics database (viewed 15 November 2005) lacks exchange rate data for the period. |
| 12 October 1987
-18 October 1987 |
pegged; 100 Somali shillings = US$1 | IMF ARER (1988: 437) | Devalued as part of a liberalization of exchange controls, and pegged to US dollar. | |
| 19 October 1987
-19 June 1988 |
pegged, dual rate; official rate 100 Somali shillings = US$1 | IMF ARER (1988: 437) | The second official exchange rate was in effect an independent float. The parallel rate depreciated (World Currency Yearbook 1988-1989: 167). | Exporters were allowed to retain up to 40% of export proceeds in special accounts and to use the funds for any purpose except transfers to other such accounts. |
| 20 June 1988
-31 December 1989 |
flexible basket, dual rate | Central Bank of Somalia annual report 1988: 33; IMF ARER (1989: 439; 1990: 441) | The second official exchange rate was in effect an independent float. The parallel rate depreciated from 500 Somali shillings = US$1 in January 1989 to 4,500 in December 1989 (World Currency Yearbook 1900-1993: 166). | Unpegged from the US dollar and depreciated the currency to 180 Somali shillings = US$1 initially. The composition of the basket was not disclosed. The US dollar apparently remained the intervention currency. Numerous adjustments occurred in 1989, as the currency depreciated from 271 Somali shillings = US$1 on 1 January 1989 to 924 Somali shillings = US$1 on 29 December 1989. |
| 1 January 1990
-1994 |
managed float, dual rate | IMF ARER (1991: 448) | The second official exchange rate was apparently in effect an independent float. The parallel rate depreciated slowly until 1992, when it reached 7,500 Somali shillings = US$1 in October 1992. When parallel market data end in December 1993 the rate was 7,750 Somali shillings = US$1 (World Currency Yearbook 1900-1993: 166). | The central bank adjusted the weekly exchange rate from 929.50 Somali shillings = US$1 on 1 January 1990 to 3,470 Somali shillings = US$1 on 31 December 1990. |
| 1994
-present (2005) |
independent float, dual rate | IMF ARER (1995: 567) | The second exchange rate was apparently in effect an independent float (see, for example, IMF ARER 2005: 868). | There are gaps in IMF data from 1991-1997 and 1999-2001, when the most recent data end. Because of Somalia's civil war, Somalia submitted no information to the IMF. As of 2005, the IMF has had no official contact with Somali authorities since 1990 (IMF ARER 2005: 872). |
Exchange rate arrangements: British Somaliland / Somaliland
| Dates | Official arrangement | Source | Unofficial arrangement, if different | Remarks |
| 1887
-17 August 1940 |
fixed; used Indian rupee | Banca Nazionale Somala annual report 1960/1961: 141 | British Somaliland was proclaimed a British protectorate in 1887. The rupee had been in use even before this because of trade links with India. Administratively, British Somaliland was initially subject to certain Indian laws, including currency laws. | |
| 18 August 1940
-about 30 April 1941 |
fixed; used Italian lira | Banca Nazionale Somala annual report 1960/1961: 164; Gill (1991: [page to come]) | Italian occupation forces introduced an East African issue of the Italian lira during the Second World War. The first commercial bank was Banca d'Italia, in Hargeisa, 1940; it closed when the Italian occupation ended. | |
| about 30 April 1942
-30 September 1951 |
fixed; used Indian rupee and East African shilling | perhaps British Military Administration, Proclamation No. 3, 2 March 1941; Proclamation No. 4, 21 March 1941; Order No. 1, 24 March 1941; all cited in Banca Nazionale Somala annual report 1960/1961: 148 | The British reconquered the colony from the Italians during the Second World War. The British restored the Indian rupee as currency and added the East African shilling. The East African shilling was equal to the UK shilling. There was also a unit of account called the East African pound, equal to the UK pound (pound sterling). Unlike the pound sterling or UK shilling, the East African shilling was a decimal currency. | |
| 1 October 1951
-1956 |
fixed (as part of a currency union); 20 East African shillings = UK£1 (1 East African shilling = 1 UK shilling) | British Somaliland, Ordinance No. 16 of 1951, cited in East African Currency Board annual report, 32 June 1952: 4 | The East African shilling became sole official currency when British Somaliland joined the East African Currency Board. The East African shilling was named after the UK shilling. There was also a unit called the East African pound, equal to a pound sterling. | |
| 1956
-30 June 1960 |
pegged (as part of a currency union); 20 East African shillings = UK£1 (1 East African shilling = 1 UK shilling) | United Kingdom, Secretary of State for the Colonies, Regulations Defining the Constitution, Duties and Powers of the East African Currency Board, as Revised and Approved on 16th September 1955, 16 September 1955, reprinted in East African Currency Board annual report, 30 June 1955: 10-11 | A change in regulations converted the currency board into a currency board-like system, so the exchange rate changed from fixed to pegged. | |
| 1 July 1960
-25 June 1961 |
pegged (as part of a currency union); 20 Somali somali = UK£1, or 1 Somali somalo = 0.124414g gold, and 20 East African shillings = UK£1 (1 East African shilling = 1 UK shilling) | Somalia, Decree Law No. 3, 30 June 1960, reprinted in Banca Nazionale Somala annual report 1960/1961: 274-82 | The former Italian Somaliland and British Somaliland united as Somalia. The somalo, the currency of the former Italian Somaliland, also became legal tender in the former British Somaliland. The former British Somaliland had become independent on 26 June 1960, but by an exchange of letters betwen the Council of Ministers of Somaliland and the British Consulate-General in Hargeisa, as the representative of the British government (reprinted in Banca Nazionale Somala annual report 1960/1961: 273), the East African shiling remained legal tender for a period of up to a year. The exchange of East African shillings for Somali shillings began on 22 April 1961 (Somalia, Presidential Decree no. 93, 10 April 1961, reprinted in Banca Nazionale Somala annual report 1960/1961: 291-2). There were as yet no Somali shilling notes, so Somali somalo notes from the former Italian Somaliland were used. | |
| 26 June 1961
-1994 |
used Somali shilling (as part of a currency union); ; see table for Somalia for a history of exchange rate arrangements during this period | Somalia, Decree Law No. 2, 6 March 1961, converted into Law No. 13, 23 May 1961; Presidential Decree No. 143, 15 June 1961; both reprinted in Banca Nazionale Somala annual report 1960/1961: 287-9, 297 | The Somali shilling became the sole legal tender in the former British Somaliland. Somali somalo notes from the former Italian Somaliland continued to circulate until the first issue of Somali shilling notes was put into circulation on 15 December 1962 (Banca Nazionale Somala annual report 1962: 169). | |
| 1994-present (2005) | Somaliland shilling, independent? float | Mubarak (2003: 318) | Somaliland declared itself independent and began issuing its own local currency, which floats against the Somali shilling. The government of Somaliland forbids the use of other Somali currencies in ites territory. |