Friday, May 17, 2013
When Washington D.C. was in financial crisis in the 1990s,
Somali-born Abdusalam Omer joined a team that turned its "junk" bonds
into investment grade paper. Now, as governor of the Central Bank of
Somalia, he wants to transform a "failed" state.
is no escaping the scale of his new assignment. His office in Mogadishu
is surrounded by the bombed out shells of former banks, symbols of
Somalia's shattered economy and its broken financial system after two
decades of conflict.
"We have to build brick by brick
and person by person," Omer told Reuters by telephone from the smartly
painted central bank, which stands out against nearby wrecks that once
housed Banca di Roma, Commercial Bank of Somalia and other institutions.
"The task is so daunting," said Omer, 58, a dual Somali-U.S. national who left Somalia at 16 and returned this year.
he is undeterred. Omer aims to issue licences to commercial banks by
the year end, a new currency to replace the tattered Somali shilling may
be on the cards and data is being gathered to build a picture of prices
and other indicators to chart the informal economy that has emerged in
Omer's decision to take the central bank
job is one more sign of a delicate recovery underway in the Horn of
Africa nation since its new parliament elected President Hassan Sheikh
Mohamud last year.
Success is not assured. Islamist al
Shabaab militants continue to launch attacks from rural strongholds,
clan divisions run deep and the government has limited control beyond
Mogadishu's boundaries. But creating a new economic order is seen as
vital to shoring up the shaky peace.
"The absence of
commercial banks is a major hindrance ... to any reconstruction and
development," said Omer, who as deputy chief financial officer helped
balance the budget of the district government of cash-strapped
The central bank is now offering
"provisional licences" so commercial banks can prepare to comply with
anti-money laundering rules and the other regulations that must be met
when full licences are issued, which Omer plans for the last quarter of
"We want to do it methodically and right," said Omer, adding foreign banks were interested in licences but did not name them.
years of chaos add complications to that careful approach. Dahabshiil, a
Somali money transfer firm with an Islamic bank in Djibouti, already
offers Islamic banking services in Somalia under a licence issued by a
past regime, though its management says it will comply with any new
ROBUST INFORMAL ECONOMY
is among several money transfer operations, telecoms firms and others
that have survived and even thrived since the fall in 1991 of dictator
Mohamed Siad Barre, whose Marxist-inspired rule gave way to anarchy
under rival warlords and stringent codes imposed when Islamists
militants took over.
"That informal economy is a robust economy," said Omer, who has previously said it was growing at 5 to 7 percent a year.
a growing confidence, Somalia's battered shilling has strengthened by
about 80 percent in the past two years since Islamist militants were
ejected from Mogadishu by an African peacekeeping force. It now trades
at about 18,000 to the dollar.
But the well-thumbed and
ragged notes are in short supply because they were last printed before
1991 and the biggest denomination is 1,000 shillings, worth about 5 U.S.
A new currency could be on the way. "There is a
unanimous understanding and agreement on the part of the Somali
leadership that there is a need for a new currency and the central bank
of Somalia will be working on that in due time," Omer said.
did not give details, but the former World Bank employee who trained
the Shanghai municipality on bond issues said he expected support on the
issue from the International Monetary Fund, which in April formally
recognised Somalia's government.
In the vacuum, many
Somalis have relied on dollars and found innovative ways to work without
a formal banking system. Mobile firm Hormuud lets clients make payments
or transfers of a few U.S. cents by text message, vital when the
smallest unit available in Somalia of the U.S. currency is a dollar
"One of the problems in a dollarised economy is
breaking down the one dollar," said Omer, adding this enterprising
spirit needed to be harnessed as the formal economy was created.
one of the first steps to that goal, the central bank is gathering data
about inflation and other indicators needed for policy making. Next
week, the bank issues its first economic report that will go up on its
new website www.centralbank.so
"It might not be as useful as other reports around the world," said Omer. "But for us it is a giant step."
routine central bank activities, such as issuing treasury bills, are
further off. Omer said debt sales were "at least 24 months" away. He
also said it was too early to discuss the bank's reserves.
in the meantime, he said there were other ways to repeat his Washington
experience in his new post. "What would be considered a triple A bond
for Somalia is ... to provide our people security and quality of life."
(Editing by Richard Lough and Giles Elgood)