Annual Report on Exchange Arrangements and Exchange Restrictions 2005


International Monetary Fund. Monetary and Capital Markets Department
Published Date:
September 2005
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(Position as of December 31, 1989)

Status Under IMF Articles of Agreement
Article XIVYes.
Exchange Arrangement
CurrencyThe currency of Somalia is the Somali shilling.
Exchange rate structure
DualThere are two exchange markets: (1) the official market, comprising the Central Bank of Somalia (CBS) and two commercial banks operating as ADs. The rate in this market applies to imports of goods and services and debt-service payments of the government; and (2) a free market, in which the exchange rate is negotiated freely between resident holders of foreign exchange accounts, i.e., export/import accounts and external accounts.
Independently floatingThe exchange rate of the shilling is determined by supply and demand in the foreign exchange market.
Exchange taxNo.
Exchange subsidyNo.
Forward exchange marketNo.
Arrangements for Payments and Receipts
Prescription of currency requirementsSettlements with other countries must be made in shillings or in specified currencies (Djibouti francs, euros, Kuwaiti dinars, Saudi Arabian riyals, Swiss francs, U.A.E. dirhams, pounds sterling, and dollars). Residents are not permitted to make settlements with Israel.
Payments arrangementsn.a.
Administration of controlExchange licensing is the responsibility of the CBS.
International security restrictionsn.a.
Payments arrearsn.a.
Controls on trade in gold (coins and/or bullion)
Controls on domestic ownership and/or tradeResidents may hold and acquire, for numismatic purposes only, gold coins that are not legal tender in any country. With this exception, residents other than the monetary authorities and authorized industrial users are not allowed to hold or acquire gold in any form other than jewelry.
Controls on external tradeImports and exports of gold in any form other than jewelry require the permission of the CBS; permission is not normally granted except for imports and exports by, or on behalf of, the monetary authorities and industrial users. Gold imported by jewelers must be melted down within one month to a fineness of not more than 22 karats. Imports of gold that originate in member countries of the EU are exempt from customs duty; imports from elsewhere are subject to a 10% duty.
Controls on exports and imports of banknotes
On imports
Domestic currencyNonresidents may bring in with them up to So. Sh. 1,000. Nonresident Somalis and foreign national travelers without diplomatic status are required, upon their arrival in Somalia, to convert at least $100 or its equivalent to shillings at the airport branch of the Commercial and Savings Bank, which acts on behalf of the CBS.
Resident Accounts
Foreign exchange accounts permittedThese accounts may be credited with foreign exchange transferred from abroad and may be debited for any external payment. Residents may transfer funds to other external accounts. Funds in these accounts may be used for invisible payments as well as for merchandise import payments. All transactions between residents and nonresidents taking place through external accounts are effected at the official exchange rate.
Exporters of goods and services may deposit 40% of their foreign exchange proceeds from exports into export/import accounts. Funds in these accounts may be sold to importers holding export/import accounts and may be used only for payments for merchandise imports.
Held domesticallyYes.
Accounts in domestic currency held abroadn.a.
Accounts in domestic currency convertible into foreign currencyn.a.
Nonresident Accounts
Foreign exchange accounts permittedNonresident accounts in foreign currency and external accounts in dollars may be opened with the CBS by foreign embassies, international institutions, and nonresidents.
Domestic currency accountsn.a.
Blocked accountsn.a.
Imports and Import Payments
Foreign exchange budgetNo.
Financing requirements for importsAll payments for private imports must be effected through LCs. Private importers may establish LCs for imports at a commercial bank on the basis of foreign exchange made available for that purpose through a foreign currency account with the commercial bank; in these cases, the foreign exchange involved is kept in a suspense account until the time of settlement of the LCs.
Advance payment requirementsYes.
Advance import depositsA non–interest bearing cash advance deposit of 100% is required to open LCs for private sector imports; the deposit is retained until the LCs are settled.
Documentation requirements for release of foreign exchange for imports
Letters of creditYes.
Import licenses and other nontariff measuresImports of alcohol, tobacco and tobacco products, crude oil and petroleum products, medical and pharmaceutical products, explosives, precious metals, jewelry, and minerals are subject to prior approval. All other items, except those prohibited for reasons of public safety and social policy, may be imported freely.
Negative listYes.
Other nontariff measuresImports of goods originating in, or shipped from, Israel and South Africa are prohibited.
Import taxes and/or tariffsn.a.
State import monopolyNo.
Exports and Export Proceeds
Repatriation requirementsAll proceeds must be repatriated.
Surrender requirementsExporters of bananas and livestock may retain 40% of their foreign exchange receipts in export/import accounts and must surrender the remainder to the CBS or to ADs. Exporters of nontraditional goods may retain 70% of their export earnings.
Financing requirementsn.a.
Documentation requirementsAn advance payment deposit of 100% of the value of exports is required for exports other than those made under LC arrangements.
Export licensesExports and reexports to Israel are prohibited. Bananas are exported only by SOMALFRUIT. Exports of various types of ivory, hides and skins, and minerals are subject to prior approval.
Without quotasYes.
Export taxesA tax of 25% is levied on exports of livestock on the basis of minimum export prices used for purposes of duty collection.
Payments for Invisible Transactions and Current Transfers
Controls on these transfersPayments to Israel are prohibited. To prevent unauthorized capital transfers, payments for current invisibles through external accounts, as well as through the sale of foreign exchange by commercial banks for their own account, are subject to licensing.
Trade-related payments
Prior approvalYes.
Investment-related paymentsInformation is not available on the payment of amortization of loans and depreciation of direct investments.
Prior approvalYes.
Payments for travelThe CBS provides foreign exchange only for official travel expenses. Foreign exchange for private travel expenses may be purchased only from holders of external accounts, with the approval of the CBS.
Prior approvalYes.
Quantitative limitsThere is a limit of the equivalent of $200 a person a trip for business and tourist travel.
Indicative limits/bona fide testThe CBS may approve applications for larger amounts in exceptional cases.
Personal payments
Prior approvalYes.
Quantitative limitsThe limit is the equivalent of $3,000 a year for medical expenses. The limit is $1,000 a year for studies abroad.
Indicative limits/bona fide testThe CBS may approve applications for larger amounts in exceptional cases for medical expenses and study abroad.
Foreign workers’ wagesUp to 50% of salaries, wages, gratuities, and allowances paid in Somalia to foreign personnel by enterprises registered under the Foreign Investment Law may be transferred.
Other payments
Prior approvalYes.
Quantitative limitsInformation is not available on the payment of subscription and membership fees.
Proceeds from Invisible Transactions and Current Transfers
Repatriation requirementsProceeds from invisibles must be repatriated and declared.
Surrender requirementsExporters of services may retain up to 40% of their foreign exchange receipts in external accounts; they must surrender the remainder to the CBS or to ADs within five business days of receipt.
Restrictions on use of fundsn.a.
Capital Transactions
Controls on capital transactionsYes.
Controls on capital and money market instrumentsCapital transactions are subject to licensing unless they are authorized by the Foreign Investment Law.
On capital market securities
Shares or other securities of a participating nature
Purchase abroad by residentsYes.
Sale or issue abroad by residentsYes.
On money market instrumentsThe regulations governing shares or other securities of a participating nature apply.
On collective investment securitiesThe regulations governing shares or other securities of a participating nature apply.
Controls on derivatives and other instrumentsn.a.
Controls on credit operationsThere are controls on all credit operations.
Controls on direct investment
Outward direct investmentYes.
Inward direct investmentInvestments must be approved by the Foreign Investment Board, which reviews within a 60-day period proposals on a case-by-case basis.
Controls on liquidation of direct investmentForeign investment (original investment plus any profit reinvested) may be repatriated five years from the date of the registration of the original investment. Repatriation may be effected in convertible currency or, at the investor’s option, in the form of physical assets. The Foreign Investment Board may reduce the above-mentioned five-year period. Capital gains resulting from the sale of shares or liquidation of assets may be transferred after taxes are paid.
Controls on real estate transactions
Purchase abroad by residentsYes.
Controls on personal capital transactionsn.a.
Provisions specific to commercial banks and other credit institutionsn.a.
Provisions specific to institutional investorsn.a.
Other controls imposed by securities lawsn.a.
Changes During 1990–2004
The information provided on the exchange and trade system of Somalia is tentative, as the IMF has not had any official contact with the authorities since March 1990.

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