History of the Central Bank of Somalia

 

The foundation of central banking in Somalia began under the Italian Trusteeship Administration (AFIS). In 1950, the Cassa per la Circolazione Monetaria della Somalia (CCMS) was created in Rome to issue and regulate currency. It introduced the Somalo currency on July 16, 1950, replacing the Italian Lira in Italian Somaliland. Meanwhile, British Somaliland used the Indian Rupee until 1951, and later the East African Shilling.

In 1954, Credito Somalo was established to provide credit for agriculture, livestock, and industry, later receiving a $2 million U.S. loan in 1959 to boost development—marking a significant turning point in Somalia's financial structure. By 1959, the CCMS relocated to Mogadishu, a key step toward financial autonomy before full independence.

 

The Somali National Bank was officially established by Decree-Law No. 3 on June 30, 1960, just one day before Somalia gained independence. It was a defining institution for the newly sovereign state, taking over the functions of the CCMS and symbolizing the shift from a colonial economic system to one centred on promoting national sovereignty and self-determination in economic matters. The bank was responsible for managing the country's monetary policy, issuing currency, and supervising the banking system. These roles are critical in ensuring economic stability and growth in the newly independent Somalia.

Operations began on July 4, 1960, and the bank was tasked with:

  • Maintaining monetary stability and safeguarding the Somali Shilling.
  • Regulating the banking and credit system.
  • Managing external reserves and supporting economic growth.
  • Acting as the government’s fiscal agent

The legal foundation was reinforced by Law No. 2 on January 13, 1961, confirming its autonomous legal and administrative status.

Notable milestones during this period include:

  • 1961: Presidential decree for currency unification in the north (East African Shilling to Somali Shilling)
  • 1962: Issuance of the first Somali Shilling banknotes
  • 1963: Formal transfer of assets from CCMS to the Somali National Bank
  • 1968: The Somali Credit Bank was merged into the Somali National Bank, consolidating its role in commercial banking, monetary policy and financial oversight.

During this era, the Bank served both central and commercial banking roles, with departments focused on currency issuance and banking operations. This dual-role model remained in place until 1975.

 

In 1975, the Somali National Bank was renamed the Central Bank of Somalia (CBS). This institutional change reflected a shift in focus from hybrid functions to a dedicated central banking mandate.

While CBS maintained oversight of monetary policy and financial institutions, its operations were deeply affected by national developments:

  • In the 1970s, under General Siad Barre, the government implemented scientific socialism, nationalizing banks, industries, and farms. While intended to drive development, the policies led to inefficiencies and growing economic stagnation.
  • In the 1980s, rising external debt and prolonged economic stagnation prompted Somalia to enter structural adjustment programs with the IMF and World Bank. However, these reforms faced significant domestic resistance and implementation setbacks, yielding little tangible progress. By the late 1980s, the onset of civil war, collapse of exports, rigid monetary controls, and acute shortages of essential goods plunged the economy into crisis.

The situation further deteriorated, and in January 1991, the collapse of the Somali state led to the suspension of the CBS’s operations.

 

  • Following the collapse of the Somali state in 1991, the CBS, like many national institutions, ceased to function, and the country’s financial system became highly fragmented. Beginning in 2001, a few former central bankers undertook efforts to preserve CBS’s legal mandate, safeguard its institutional memory, and lay the foundation for its eventual revival. Notable individuals who played a key role in this process include:
  • Mohamed Mohamud Ulusow (2001–2005): Appointed during the early phase of the Transitional National Government (TNG), he played a critical role in preserving the institutional identity of CBS. He worked to re-establish basic banking functions and safeguard the Bank’s legal mandate, ensuring its continuity through a period of state collapse and prolonged instability.
  • Bashir Isse Ali (2005–2010): Led CBS during the initial stages of institutional reconstruction. Despite severe resource constraints and structural limitations, he maintained key functions, including a fiscal agent service to the Transitional Federal Government, and initiated reform-oriented dialogue to recover bank’s assets and revive the its role in Somalia’s economic recovery.

 

CBS was formally re-established under the Central Bank Act of 2012, restoring its role as Somalia’s monetary authority. Since then, the Bank has undertaken gradual yet significant reforms aimed at modernizing its operations and aligning with international central banking standards. However, frequent leadership changes have posed challenges to institutional continuity. Since 2012, five Governors have led the Bank:

  1. Abdullahi Jama Ali: Served as Governor from 2012 to early 2013;
  2. Abdusalam H. Omer: Held the position from January 2013 to September 2013;
  3. Yussur Abrar: Appointed on 13 September 2013 and resigned on 1 November 2013;
  4. Bashir Isse Ali: Reappointed in November 2013 served until April 2019;
  5. Abdirahman M. Abdullahi: Assumed office in April 2019 and is the current Governor.

Since 2020, the CBS has undertaken transformative reforms aimed at modernizing its institutional capacity, regulatory framework, and financial infrastructure. Key developments during this period include:

  • Organisational Restructuring: CBS was reorganized into three functional policy groups to enhance operational effectiveness:
  • Monetary, Financial & Regulatory
  • Currency & Banking Operations
  • Financial, Administrative & Support Services
  • Strengthened Governance Framework: Introduced a committee-based decision-making structure, robust internal controls, risk management framework, and enhanced internal audit functions.
  • Regulatory Reform: Enacted and implemented key financial sector laws, regulations, and industry guidelines to support market development and oversight.
  • Licensing and Supervision: Licensed and began regulating banks, money transfer operators, and mobile money service providers under a unified framework.
  • Financial Sector Integrity: Promoted financial integrity by strengthening Anti-Money Laundering and Combating the Financing of Terrorism (AML/CFT) regulations and compliance enforcement.
  • Infrastructure Development: Launched critical components of the national payment system, including RTGS, ACH, IBAN, SOMQR, and SIPS, to enhance interoperability and improve efficiency across banks and payment service providers.
  • Decentralization of Operations: Expanded CBS’s presence by establishing regional branches in the Federal Member States to improve access and oversight.
  • Data Transparency and Reporting: Initiated regular publication of national accounts and economic data, including quarterly and annual economic reports, to support evidence-based policymaking.

Former Governors

Bank Notes

As Somalia moved closer to independence, the Italian Federal Government, which was responsible for the administration of Southern Somalia at the time, established the “Cassa per la Circolazione Monetaria della Somalia (C.C.M.S.)” in 1949, headquartered in Rome, Italy. This institution began printing a national currency named “SOMALO,” which replaced the former “East African Shilling.”

The SOMALO currency was ratified through Legislative Decrees Lr. 15 and 16 issued on 16 May 1950. The central office of the monetary institution was transferred from Rome to Mogadishu on 6 April 1959, where it fully assumed the responsibilities and assets of the Mogadishu branch of Banca d’Italia.

After gaining independence, the Somali Government introduced a new national currency called the Somali Shilling. Its technical specifications were outlined in Presidential Decree Lr. 86 of 5 March 1962 and formally issued under Legislative Decree Lr. 2 of 5 June 1962. It officially entered into circulation throughout the country on 15 October 1962.

In 1968, the National Bank of Somalia replaced the earlier coinage in use since the 1950s with new designs, sizes, inscriptions, and metals. These coins were approved through Presidential Decrees Lr. 174 and 175 issued on 3 July 1968 and entered circulation on 4 November 1968. The previous coins were withdrawn by 31 December 1970.

As part of institutional reforms, Law Lr. 21 of 8 February 1975 officially renamed the “National Bank of Somalia” as the “Central Bank of Somalia.” This change also affected previously issued banknotes authorized under Presidential Decree Lr. 134 of 1974.

Newly printed banknotes bearing the updated name were authorized by Decree Lr. 74 of 6 December 1977 and enforced through Ministerial Decree Lr. 18 of 22 March 1978. These banknotes entered circulation nationwide starting 25 March 1978.

Referring to Somalia’s monetary laws, the Governor of the Central Bank submitted a request to issue new banknotes. The Supreme Revolutionary Council approved the issuance through Decree Lr. 67 of 30 December 1982.

Due to severe currency devaluation, the Central Bank of Somalia introduced a higher-value banknote of 500 Somali Shillings to reduce the volume of notes in circulation.

  • Authorized under Presidential Decree Lr. 7, 1 January 1989
  • Purpose: Simplify transactions with higher-value notes

Facing rising printing costs of smaller denominations, the Somali Government decided to introduce a high-value note. While a joint letter was sent to the IMF on 3 June 1990, the 1,000 Shilling note was already in circulation by 15 May 1990, as stated in Ministry of Finance Decree Lr. 6 of 7 May 1990.