The Central Bank of Somalia Act, Chapter II Art 2 Section (2) states the functions of the Bank:
The Bank exercise any type of central banking function and shall enjoy all the prerogatives of a Central Bank, and without prejudice to the generality of the foregoing shall in particular have the power to issue currency, regulate the banking and credit system and manage the external reserves of the Republic
OBJECTIVES OF THE IMPLEMENTATION OF MONETARY POLICY
The Central Bank of Somalia’s medium and longer-term monetary policy objectives are:
- Price stability
- Formulating and implementing monetary and exchange rate policies.
- Maintaining and enhance the value of the local currency
- Maintain financial stability
- Harmonize and coordinate Government Fiscal policies with monetary policies.
On the monetary policy management, the newly revived Central Bank of Somalia is in the process of taking full charge of formulating and implementing monetary policy. Speedy resumption of taking charging of monetary policy by the Central Bank is however handicapped by lack of adequate resources, both financial and material.
Alongside the Somali shilling, the US dollar is also widely accepted as a medium of large and high transactions even for local trade exchanges i.e, the economy is deeply dollarized in view of weak confidence in the local currency some of which are counterfeits;
Dollarization not withstanding, the large issuance of the Somali shilling increasingly fuels price rises especially for the low value transactions to the extent that inflation runs in high double digits and the Somali shilling is continuously on a depreciation trend. The inflationary environment is expected to cease as soon as the Central Bank takes full charge of monetary policy and replaces the presently circulating currency printed by the private sector.