SOMALIA: Poor suffer most from currency woes

Thursday, April 17, 2008
Hyperinflation and increasing insecurity have forced Somali businessmen to demand payment in US dollars, creating difficulties for ordinary people with limited access to the greenback, traders said.

"We are demanding payment in US dollars because it has become impossible to keep track of where the value of the Somali shilling will be from one hour to the next," Liban Yusuf, a businessman in Bosasso, said.

"Inflation is such that if a businessman sold goods for Somali shillings, half an hour later he stands to lose 30 to 40 percent," he added.

There was also the issue of security and where to store the Somali notes, given that the shilling was exchanging at 31,500 to the dollar, down from 15,000 a year ago.

"If you sell commodities worth $1,000 in Somali shillings, you will need containers to keep it," he said, because the highest denomination was only one thousand shillings.

According to traders in the capital, Mogadishu, and Bosasso, the commercial capital of the self-declared autonomous region of Puntland, the situation had been aggravated by demands that they pay taxes and fees in dollars.

"When I bring commodities into the country I have to pay the government in cash dollars or my goods will not leave the port," Abbas Mohamed Duale, spokesman for the business community in Mogadishu, said.

There was no immediate comment from the government.

Yahye Sheikh Amir, dean of economics at Mogadishu university, said the Somali currency had lost both value and credibility. "What is happening is that people are printing money on A4 paper in their homes and trying to exchange it for something that was bought with hard currency," he explained. "It is not sustainable."

The currency problems have pushed up the prices of basic commodities, including food.

There has been no legal printing of Somali currency since the collapse of the Siad Barre regime in the early 1990s. All the local currency in circulation is either printed in the country or imported by individual businessmen.

The problem is exacerbated by the lack of a properly functioning central bank to set monetary policy. As a result, Amir said, the "biggest losers are the very poor, especially the urban poor.

"In Mogadishu, an estimated 20 percent receive remittances," the professor said. "Add another 20 percent who live off those who receive money. The rest of the population will be out of luck with their livelihoods severely affected."

He urged the government to allow the re-circulation of old notes. "The only way this can be resolved is for the government to stop home-printing of currency and start using the Somali shilling."

Source: IRIN