The Major Causes of Local Currency Depreciation in Somalia
Keywords:Local currency, causes, depreciation, Somalia
This study dwelled on the major causes of currency depreciation in Somalia. The main purpose of the study was to investigate in detail the major causes of local currency depreciation in Somalia. The study used qualitative research method using descriptive research design to investigate the major causes of local currency depreciation in Somalia. The study employed documentary review data collection tool and collected the secondary data through thorough review of the articles and books related to the major causes of local currency depreciation in Somalia. The key findings of the study on the major causes of local currency depreciation in Somalia encompass: existence of large quantities of Somali shillings in the market; the fall in the revenue collection by the government in the last two years weakens the country’s local currency and causes its depreciation; existing monetary problems that hinder the control of financial activities by business owners in Somalia by the central bank of Somalia and financial regulatory authority in Somalia; weak monetary control coupled with lack of effective monetary policy to regulate and control the amount of inflow and outflow of foreign currency by the financial authority in the government such as Central Bank of Somalia and ministry of finance of the Federal Republic of Somalia and lastly dollarization of the economy which has replaced local currency and depreciated it owing to the massive inflow of foreign currency inform of remittance without being monitor and controlled by the financial authority in the country. The study recommended that the Federal Government of Somalia should introduce new monetary policy to monitor, control and supervise financial activities in the country and the Federal Government of Somalia should implement financial reform that allow the use of local currency to carry out all local transactions in Somalia to enable the local currency to regain its value and reduce the increasing rate of local currency depreciation.