Besides performing the traditional activities, the central bank has to undertake responsibility for economic growth with stability in this fragile economy.
In addition, Somalia does not have well-organized money and capital markets. The central bank should play a crucial role in developing the banking and financial system of the country.
It should perform the following developmental and promotional functions to help the country in developing its financial institutions.
Promote Economic Growth- It should focus on promoting the process of economic growth and ensure adequate monetary expansion in the country. Furthermore, as a banker to the government, the central bank can provide funds for initiating investment in the public sector.
Traditional and Non-Traditional Functions- It should have the monopoly of note-issuing, acting as banker to the government, control and regulate the credit, and maintaining external stability.
Internal Price Stability- The Central Bank should maintain internal price stability by adopting a monetary policy that can control inflationary tendencies and ensure market stability.
Developing a Private Banking System- CBS should take measures to develop an integrated commercial banking system, but also should not miss the opportunity to directly undertake the commercial banking functions when it is necessary.
Capacity Building- One of the most difficult challenges facing Somalia’s banking system is to develop and train staff that can manage the critical role of the institution. The CBS should establish training facilities that will help develop the skillset of the future employees.
Expansion of the Services- In order to promote economic development throughout the country and support the different economic sectors such as agricultural, fishing, and livestock, the CBS should undertake necessary steps for branch expansion in the major cities of the country.
Finally, Somalia has been without a strong functioning central government for the last 27 years. Therefore, the central bank should not only play a regulatory role, but also a developmental role in the country’s fragile economy. To implement these important policies, it is the responsibility of the Prime Minister’s Office and Governor of the Central Bank.
International Banker/Financial Analyst