Societies used different forms of money as a medium of exchange of goods and services throughout the history. The Somali shilling has been the official currency since 1962 and the Central Bank of Somali issued banknotes in denominations of 100 shillings, 20 shillings, 10 shillings and 5 shillings. In 1967 the Central Bank also issued new coins with the value of 50 cents, 10 cents, 5 cents and 1 Somali shilling. The value of the Somali shilling against the us dollar and other major global currencies fluctuated since 1960s in response to the country’s economic conditions. The shilling recorded its highest value during the country’s economic boom of 1970s where the domestic production tremendously increased and the country embarked its industrialization initiative to add value to the primary products and increase the export performance. The low inflation rate resulted from the high GDP growth rate contributed to the strong Somali shilling which in turn facilitated the importation of intermediate capital goods that were necessary for boosting the domestic manufacturing industry. However, in the late 1980s the country’s GDP has fallen excessively and soaring inflation rate of more than double-digits led to the depreciation of the Somali shilling. As a result of the rising inflation, new additional banknotes were issued in denominations of 500 and 1000 shillings.
After the collapse of the Somali state, some businessmen imported a large number of counterfeit currency and it was accepted by the public and circulated as the official currency across the country. In the mid of 2000s the 500 denominations of the Somali shilling lost the public acceptance and since then the 1000-shilling note remained the only denominations of the Somali shilling available in the country. Despite the lack of effective government and central bank, the value of the Somali shilling remained stable and didn’t fluctuate very much. Now the supply of 1000-shilling note is very limited and it is currently facing a lack of public acceptance as it is only used for very small business transactions. Furthermore, the dollarized mobile money replaced the national currency and it is widely used in both the urban and the rural areas of the country. The electronic mobile money created the dollarization of the economy which inflated the prices of all goods and services and reduced the purchasing power of money income especially the poor people who mostly earn their income in Somali shilling. The central bank of Somalia has recently announced that it will issue new banknotes that will replace the current circulating 1000-shilling notes and combat counterfeit shillings in the market. If the central bank implements the announced policy plan, Somali will have new 1000-shilling notes as legal tender in 2024.