Annual Report on Exchange Arrangements and Exchange Restrictions, 2007
Chapter

SOMALIA

Author(s):
International Monetary Fund. Monetary and Capital Markets Department
Published Date:
October 2007
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(Position as of December 31, 1989)

Status under IMF Articles of Agreement
Article XIVYes.
Exchange Measures
Restrictions and/or multiple currency practicesn.a.
International security restrictions
Other security restrictionsn.a.
References to legal instruments and hyperlinksn.a.
Exchange Arrangement
CurrencyThe currency of Somalia is the Somali shilling.
Exchange rate structure
DualThere are two exchange markets: (1) The official market comprises 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. (2) There is also 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.
Classification
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.
References to legal instruments and hyperlinksn.a.
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.
Controls on the use of domestic currencyn.a.
Use of foreign exchange among residentsn.a.
Payments arrangementsn.a.
Administration of controlExchange licensing is the responsibility of the CBS.
Payments arrearsn.a.
Controls on trade in gold (coins and/or bullion)
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.
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 exports
Domestic currencyn.a.
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, on 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.
References to legal instruments and hyperlinksn.a.
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.
Held abroadNo.
Approval requiredn.a.
Accounts in domestic currency held abroadn.a.
Accounts in domestic currency convertible into foreign currencyn.a.
References to legal instruments and hyperlinksn.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.
Convertible into foreign currencyn.a.
Approval requiredn.a.
Blocked accountsn.a.
References to legal instruments and hyperlinksn.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 used as exchange licensesn.a.
Othern.a.
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.
Open general licensesn.a.
Licenses with quotasn.a.
Other nontariff measuresImports of goods originating in, or shipped from, Israel and South Africa are prohibited.
Import taxes and/or tariffs
Taxes collected through the exchange systemn.a.
State import monopolyNo.
References to legal instruments and hyperlinksn.a.
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.
Surrender to the central bankYes.
Surrender to authorized dealersYes.
Financing requirementsn.a.
Documentation requirements
Letters of creditn.a.
Guaranteesn.a.
Domiciliationn.a.
Preshipment inspectionn.a.
OtherAn 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.
With quotasn.a.
Export taxesA tax of 25% is levied on exports of livestock on the basis of minimum export prices used for purposes of duty collection.
Collected through the exchange systemn.a.
Other export taxesn.a.
References to legal instruments and hyperlinksn.a.
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.
Quantitative limitsYes.
Credit card use abroadn.a.
Other payments
Prior approvalYes.
Quantitative limitsInformation is not available on the payment of subscriptions and membership fees.
References to legal instruments and hyperlinksn.a.
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.
Surrender to the central bankn.a.
Surrender to authorized dealersn.a.
Restrictions on use of fundsn.a.
References to legal instruments and hyperlinksn.a.
Capital Transactions
Controls on capital transactionsYes.
Repatriation requirementsn.a.
Surrender requirementsn.a.
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
Sale or issue locally by nonresidentsn.a.
Purchase abroad by residentsYes.
Sale or issue abroad by residentsYes.
Bonds or other debt securitiesn.a.
On money market instruments
Sale or issue locally by nonresidentsn.a.
Purchase abroad by residentsYes.
Sale or issue abroad by residentsYes.
On collective investment securities
Sale or issue locally by nonresidentsn.a.
Purchase abroad by residentsYes.
Sale or issue abroad by residentsYes.
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 (FIB), 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 FIB 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.
References to legal instruments and hyperlinksn.a.
Provisions Specific to the Financial Sector
Provisions specific to commercial banks and other credit institutionsn.a.
Provisions specific to institutional investorsn.a.
References to legal instruments and hyperlinksn.a.
Changes during 1990–2006
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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