Decrease in US Dollar exchange rate cause hardship in Somaliland
HARGEISA (Somaliland) — In recent months the American dollar exchange rate in Somaliland has made a substantial decline and has had dire effects in the country. The price of day-to-day basic necessities has increased in the months after Ramadan, causing locals to spend more cautiously than they would have before. Somalilandpress’ reporter Abdiqani Hussein Baynax has been documenting economic hardship in the country since middle of Ramdan. The price of basic food, fuel and livestocks have increased dramatically, leading many people to question why the government should not intervene to prevent inflation. In the past couple of months after Ramadan the exchange rate of the American dollar has plummeted and continued at that rate on the days of Eid celebration (ciidul-fidriga).
Somaliland public has different theories on why low exchange rates occur at this time of year. Some believe that increase in remittance sent from families abroad during Ramadan and Eid has an adverse effect on the exchange of the American dollar.
Another theory is that wages given to government employees and armed forces by the newly elected government at that time may have resulted in the low exchange rate for the dollar.
It has been over one month since Ramadan ended. Usually during Ramadan, goods and food increase in price because of increase in demand. The local food markets have been hit hardly by the low rate of the dollar but how much damage has it caused exactly? To find more about, I went to Hargeisa’s busiest and biggest markets, Waaheen.
As of this morning 100 American Dollars is exchanged for 580,000 Somaliland Shilling at the most 590,000. Comparatively on Eid day 100 dollars was equivalent to 600,000 Somaliland Shillings at the most 620,000.
These exchange rates indicate substantial decline in the exchange of the dollar. Before the month of Ramadan 1 American Dollar was equal to 7000 Shillings, whereas now its exchanged for 5500 SS.
This has led increase in prices of basic food. Currently, the fifty kilograms bag of sugar is sold at $43 American Dollars, whereas on Eid day it stood at 39 Dollars. That’s a price difference of 4 dollars. Rice, Flour and Milk all have had increases in prices as well. The price of cooking oil on the other hand stayed the same (20 liters for 23 Dollars).
I talked to Hussein Ahmed a local shop owner in Hargeisa to get his take on the price of the USA Dollar and how it has affected shoppers.
Hussein Ahmed said that ‘The Dollar has gone down, whilst prices on foods and local goods has increased. As a result people are buying less. People tend to buy less when the Dollar drops and they save their earnings. As you know most of the locals have family abroad and are sent regular allowances, therefore as long as the Dollar is at the state its in they’re going to be a lot more cautious when spending.’
The change in the American Dollar has not only had an affect on basic necessities but gold as well. Prior to Ramadan 100 grams of gold was sold for 3600 Dollars and the present it’s selling for 3700 US Dollars.
Yusuf Khadar who owns a gold shop within Oriental Hotel in Hargeisa gives offers his view on the increases in gold. “each gram of gold has increased by 1 Dollar, this is because we buy the gold using American dollars therefore when the Dollar drops the prices of gold goes up.”
Somalilandpress contacted The major remittance companies, the heads of The Central Bank of Somaliland and the Treasure Department, They all stated that the decreasing Dollar is at its lowest in long time but they’re confident that it will bounce back during the Hajj season. This is because a large number of livestock is shipped out from Somaliland to Arab countries, specifically Saudi Arabia.
National Bank Intervention
Somaliland National Bank intervened to curb sudden inflation. Somaliland has released large amount of Somaliland currency into market buying back US Dollars. This move has relived business owners and the public.
The Director if Somaliland National Bank Mr. Abdi Dirir and Deputy of minister of Finance Mr. Warsama Said Abdi held a press conference in Hargeisa. They stated the National Bank is release large amount of reserve to fight decrease of the price of the US Dollar.
Both officials said that this move will help to increase the price of the Dollar. They added that this decrease in Dollar price usually results when there a large amount of Dollar is circulating the in the country. Remittance money during Ramadan and release of backed up government’s employees salaries have also caused disturbance in exchange market.
Since the Bank bought back US Dollar from the market, the exchange rate of the Dollar has shown slight increase in price of Dollar comparing to the Somaliland Shilling.
Reported by Abdiqani Baynah in Hargeisa and contributed by Ashwaq Mohamed in London