Puntland has been experiencing currency troubles for months leading to protests and discontent. This thread explains the cause and provides a few recommendations.

Thread:

There has been a large influx of counterfeit shillings in Puntland in recent months causing the value of the shilling to drop significantly. The influx has been noticed by everyone from money traders to the common person. 1/13

@PSD_MoPIC has confirmed that there is no inflationary pressure in Puntland. Inflation is a measure of the rate of rising prices of goods and services in an economy and according to the PSD, this hasn't actually occurred in Puntland. In a sense, they're right. 2/13

Prices of goods in Puntland are more or less the same as in previous years *but in USD*. This is what the government is talking about when they say there's no inflation. The store shelves are still fully stocked with goods. 3/13

However, prices of those goods have gone up significantly *in shillings* due to an influx of counterfeit shillings. 4/13

Unlike the old wrinkled pre-1991 era shillings used in the south, Puntland uses new shillings minted by @stateBankPL. These shillings are highly vulnerable to counterfeiting and Puntland's police do not have the training or resources to investigate or combat this. @UNODC 5/13

Despite that, a number of truckloads of counterfeit shillings have been intercepted by police in recent months. Considering the scale of the problem, this is only the tip of the iceberg. 6/13 https://twitter.com/SaveSoomaaliya/status/1333822399666503681?s=19

Essentially, Puntland's economy was doing just fine aside from COVID related issues earlier this year. Once counterfeit shillings flooded the market and devalued the currency, people panicked and lost confidence in the shilling with many business owners switching to USD. 7/13

This created a feedback loop where, as more people abandoned the shilling, its value dropped even further.

This is a problem because many people still rely on the shilling. It is believed that 20-30% of the population use shillings. 8/13

Puntland is now at risk of dollarization of its economy if the government doesn't find a way to return confidence/stability to the shilling. Dollarization delegates monetary policy to the U.S. Federal Reserve & puts the government's billions of shillings in reserve at risk. 9/13

While this currency crisis only began in Puntland this year, other regions have been grappling with their own for years with some even using the Ethiopian birr as an alternative to the shilling rather than USD. 10/13

Recommendations:

1) @PSD_MoPIC should conduct analyses in both shillings and USD going forward to better track market conditions.

2) It was previously announced that business owners were forbidden from refusing shillings as payment. This needs to be vigorously enforced.

11/13

3) The government must immediately assemble a financial crimes police unit to track and combat counterfeiting.

12/13

@SaidAbdullahiDe @AbwaanJibril @jama_deperani @MOFPuntland @Plstatehouse @stateBankPL @PSD_MoPIC @BariPolice

The screenshots were taken from this excellent report released by @SIDRAInstitute last week.

13/13 https://twitter.com/SIDRAInstitute/status/1340557007619837953?s=19