Puntland’s plan to launch its own regional currency by 2025 is causing a stir in Somalia, with the semi-autonomous state directly challenging the federal government’s control over monetary policy. The new currency would replace the Somali Shilling, which has lost value in the region, and further assert Puntland’s economic independence amid ongoing disputes over governance and autonomy in Somalia’s fragile federal system.
Puntland President Said Abdullahi Deni framed the decision as a necessary response to the region’s unique economic challenges. “Our communities face immense hardship due to the inefficiency of the Somali Shilling,” Deni said in his announcement in Garowe. “We need a financial tool tailored to our realities. This isn’t about abandoning our Somali identity but finding solutions for Puntland’s economic needs.”
Puntland has struggled with inflation and currency shortages for years, forcing many businesses and individuals to rely on the U.S. dollar. Since 2021, the Somali Shilling has barely circulated in Puntland, after a steep devaluation rendered it useless for daily transactions. Introduced in 1960, the Somali Shilling once symbolized national unity, but it has steadily lost its value, particularly after Somalia’s central government collapsed in 1991, leading to rampant counterfeiting and hyperinflation.
The Central Bank of Somalia has made attempts to reform the currency, including plans to replace old, counterfeit notes with newly printed Somali Shillings. However, these reforms have been slow, and Puntland’s leaders have grown increasingly frustrated by the lack of progress.
Deni’s administration argues that introducing a regional currency would stabilize Puntland’s economy and provide the region with greater financial autonomy. However, as reported by Hiiraan Online, the move has sparked legal debates over whether federal member states have the authority to issue their own currency under Somalia’s provisional constitution. Legal experts, including Zakariye Yusuf, highlight that the Somali constitution places monetary policy under the exclusive jurisdiction of the federal government, making Puntland’s proposal a violation of this framework.
The push for a regional currency is part of a broader and ongoing dispute between Puntland and the federal government. Puntland has repeatedly accused Mogadishu of failing to fulfill its responsibilities, including overhauling Somalia’s outdated currency system. “The federal government was once a unifying force across Somalia, but that reality no longer exists,” Deni asserted. “Puntland’s foundation was built on protecting our people’s interests, and we will continue to act in their best interest.”
The Somali Shilling’s diminishing role in Puntland has also led to a growing reliance on the U.S. dollar, which has become the primary medium of exchange in the state. This shift has weakened ties to the Somali Shilling and contributed to the push for financial independence. Somalia remains heavily dependent on the U.S. dollar and private bank-run electronic payment systems, but many rural areas lack access to such services, exacerbating the divide between urban and rural populations.
Puntland’s efforts to introduce a regional currency could set a precedent for other federal member states in Somalia. However, the proposal raises important questions about the future of Somalia’s federalism and the ability of the federal government to maintain economic cohesion across the country. With tensions already high, the introduction of a regional currency threatens to further strain the already fragile relationship between Puntland and Mogadishu.