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President Said Abdullahi Deni of Puntland announced a groundbreaking initiative to introduce a new regional currency by 2025, marking a significant step towards economic independence for the semi-autonomous state in northeastern Somalia. The announcement comes three years after Puntland ceased using the Somali Shilling, transitioning instead to the U.S. dollar and loans from telecommunications companies.
A New Era for Puntland’s Economy
In a public statement, President Deni confirmed that a comprehensive study on the feasibility of the new currency has already begun. He emphasized that the currency would be aligned with Somalia’s broader financial system in the long term.
“The Puntland government has initiated a study on creating its own currency, similar to practices in some federal countries. This currency will be compatible with Somalia’s financial system in the future when the mindset and circumstances improve,” he stated.
The move aims to strengthen Puntland’s economy, address challenges related to the dependency on foreign currencies, and reduce economic vulnerabilities.
Challenges of the Somali Shilling
Puntland stopped using the Somali Shilling in 2021 following President Deni’s directive to halt tax collections in the currency at the Bosaso port. Traders and businesses swiftly abandoned the Somali Shilling, citing inflation and a lack of stability. This led to a reliance on the U.S. dollar, which has since dominated Puntland’s economy.
The transition to a regional currency is expected to address longstanding concerns, including inflation and economic leakage, while providing a stable foundation for local trade and investment.
Economic Independence and Federal Integration
Despite Puntland’s move towards economic independence, President Deni clarified that the regional currency would eventually integrate with Somalia’s national financial systems. This reflects Puntland’s commitment to a unified federal Somalia while asserting its autonomy to address immediate economic challenges.
Observers have noted that Puntland’s initiative is similar to models in other federal countries, where states or regions maintain their own currencies while aligning with national financial frameworks.
Public Reaction and Economic Implications
The announcement has sparked mixed reactions among Puntland residents and businesses. Supporters of the move argue that a regional currency will empower Puntland’s economy, allowing it to address local needs more effectively.
However, critics have raised concerns about potential risks, including inflation, limited acceptance of the currency outside Puntland, and the challenges of ensuring trust and stability.
Economists suggest that for the initiative to succeed, Puntland must implement robust monetary policies and establish strong financial institutions to regulate and support the new currency.
Looking Ahead: Puntland’s Vision for 2025
Puntland’s decision to launch a regional currency is a bold step that underscores its ambitions for economic growth and self-reliance. As the region moves closer to the 2025 launch date, the government will face the challenge of balancing regional aspirations with national cohesion.
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