What Are The Main Functions Of Central Bank

The first and most important function of a central bank is to accept responsibility for advising the government on the making of the country’s financial policy, and thus to see that it is carried out. The government must decide how much money there shall be in the country at a given time, and the central bank must take steps to increase or decrease the supply accordingly.

This was by no means clear when the bank of Somaliland was founded.

The specific reason then for its formation was to provide money for the government during the time when public expenditure had become too expensive to be financed out of current taxation. Its business at first was the receiving of money on deposit and lending of money against satisfactory security.

At first this lending was nearly all to the government, and gradually the bank of Somaliland came to perform other services on behalf of the government, and so to become regarded as “banker to the government”. Thus it undertook on the government’s behalf the circulation of payment vouchers, which were simply promissory notes of the government.

Accordingly, the bank of Somaliland was empowered to open regional branches for the purpose of restoring confidence by issuing its notes in the country.

As the central bank of the country, the bank of Somaliland must:

Stand ready to take prompt and decisive action to prevent any spreading loss of confidence
Implement the monetary policy of the government.
Act as banker to the government
1. Manage the exchange equalization account.
2. Is the note issuing authority;
3. Acts as registrar of government and nationalized industry.
Act as banker to the deposit banks
Have about hundred (100) accounts for overseas, central banks and for such bodies as the International Monetary Fund and The International Bank for Reconstruction and Development (the World Bank).
Replace worn-out and distorted bank-notes.