Somalia's economy is fully dollarized, what are the implications?

[Thegoodshepherd]

Somalia's economy is fully dollarized. The shilling is no longer really used to buy items that cost anything more than $10.
Two papers helped me better understand what the implications of a fully dollarized economy may be.

This is a general overview:
Full Dollarization The Pros and Cons

This is a good case study on Ecuador, population 18 million, which has had a fully dollarized economy since 2000.
Twenty years of official dollarization in Ecuador: a blessing or a curse?


The most interesting thing I learned from this is the consensus that dollarization is permanent.
This was news to me.

The differences between currency boards and dollarization are few, but important. Dollarization's key distinguishing feature is that it is permanent, or nearly so. Reversing dollarization is much more difficult than modifying or abandoning a currency board arrangement. In fact, the largest benefits claimed from dollarization derive from the credibility it carries precisely because it is nearly irreversible. And yet for some countries under particular circumstances, the irreversibility could come at a very high cost.

In countries where monetary policy has lost credibility, the adoption of a foreign currency may offer a strong commitment device (Del Negro et al. 2001) and stabilize monetary and financial conditions. This substantial benefit in terms of monetary policy credibility is mostly related to its near irreversibility. Reversing dollarization is almost impossible and would entail tremendous costs.

 

[NinWero]

I swear I had the same thought. Imagine in Xamar someone charging a coffee $2 dollars USD, it would be hard for them to accept selling in Somali shilling and at a lower price.

The only thing I could think of is pegging the new Somali currency to the US dollar, cent for cent.

 

[bidenkulaha]

If only we could get access to dollars. I would genuinely support us becoming an economy satellite of the US so we could get printed American dollars.

The current status quo is unsustainable as remittance falls.

 

[Abaq]

Somalia is a banana republic that only exists on paper. Dollarization is merely a symptom of this.

 

[Aurelian]

I swear I had the same thought. Imagine in Xamar someone charging a coffee $2 dollars USD, it would be hard for them to accept selling in Somali shilling and at a lower price.

The only thing I could think of is pegging the new Somali currency to the US dollar, cent for cent.

the same price as the most developed EU states?

 

[Aurelian]

If you pay the salaries of the army, the police and various other public sector and paid them with local currency ( A new one) the adoption will be more easier