The Death Knell for the Mighty Somali Shilling: The Causes and Effects of the Somali Shilling Depreciation and Currency Crisis in Puntland
The Somali shilling is prone to sudden exchange rate increases and shocks. It has lost more than 30 percent of its value in a matter of three weeks between August and September 2020. The exchange rate of Somali shilling to US dollar has reached an all-time high of 46,000 SoSh per US dollar. The recent jump of the exchange rate in Puntland is the result of conglomeration of factors ranging from increased supply of Somali shilling, decreased acceptance of the Somali shilling, decline in the flow of US dollars into the State, underlying fiscal and monetary problems to the economic downturn caused by Covid-19 pandemic. A significant proportion of the population still uses Somali shilling. The poor and low-income families, internally displaced people (IDPs) and rural communities who live in areas that do not have telecommunication coverage rely on the shilling for trade. These particular groups are hit hardest by the depreciation of the local currency. Puntland government has taken a number of measures to stabilise the value of the Somali shilling.