Published On: Fri, Oct 8th, 2010

Decrease in US Dollar exchange rate cause hardship in Somaliland

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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.

Market in Hargeisa

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

Mr. Abdi Dirir and Mr. Warsama Said Abdi

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

  • HSN

    Thank you for this. Very helpful information for us living here.

    • Hiden Group

      As other fellow citizens mentioned, when your currency appreciates against the major forgoing currency that you use for foreign trade, imported goods should become cheaper and exported goods become more expensive – hence bad for the export industry. We all know that Somaliland succeeded to become a nation imports every thing that they consume. This tells us that since our currency appreciated, imported goods should be cheap. And the current situation should make happier consumers in Somaliland, as their shilling would buty them more dollars. For example, as obvious from the above article, a 100gr of gold used to cost $3,600.00 or 23,760,000.00 Somaliland Shilling. Now the same 100gr of gold costs $3,700.00 or 21,460,000.00 Somaliland Shilling. Isn’t that a good new for Somaliland.

      Unless I am mad, it is sad to see the Central Bank of Somaliland trying to hold down Somaliland currency. This activity would have only made sense if Somaliland had an exporting industry. And as we all know this industry is absent, as we are all used to dependency culture that changed Somalilanders here in Somaliland mere beggars of their relatives in abroad.

  • m. ali

    when dollar depreciate then imported goods must be cheap. Unfortunately in Somaliland few greedy wealthy importers are the ones milking their brothers. They have the monopoly of the business of every thing.The government must monitor the prices of essential goods. Again if the business people are making millions in profit they must be taxed to enable the government get income to provide free healths and possible free primary education. I was in Hargeisa and was lookinf for gillete shaving machine. The price was one dollar for one, while here in England you can get 10 for 4 dollars. That is exploiting the poor public. A new trouser cost 22 dollars, unbelievable, and i can buy same in dubai for maximum 7 dollars. Government needs to establish a team to deal with fair trade and competition allowed in the country.

  • Abraham

    The best way to guarantee stable prices for essential foods and independence form international markets and greedy importers is to encourage farming and fishing. The best way to go about this is to subsidize local farmers and levy high import duties on all the items that are imported but which are also locally produced. In this way our farmers will have a competitive advantage on the imports and make profits which they can then reinvest into their farms, equipment, and irrigation systems. It is wiser not be at the mercy of the international commodity markets.
    The government should also reform our financial system and get rid of all the paper that we call our ‘money’. Carrying sacks of worthless currency is impractical for doing day to day business. Instead, we should get a newer more practical notes which can be carried easily and whose values are pegged to the prize of gold for the sake of stability.

  • Nas

    I 100 per cent agree with Abraham that the Somaliland gov MUST encourage and support the development of our farming and fishing sector.

    We cannot have a economy which is heavily dependent on the import of basic essential goods such as sugar, cooking oil, flavour etc AND having a single source of foreign currency earner which is unfortunately the live stoke market. A market that is very, very fragile at best prone, NOT to market demands BUT rather emotional/political interest of the SAUDI royal family!!! (remember to 9yr BAN)

    We have a fertile farming land which is NOT exploited, rich abundance of fishes, breath-taking mountain views and countryside in which our gov should promote eco-tourism, and mineral wealth inwhich our gov should encourage small-scale mining…all of these new sector will not only diversify our economy BUT will also help create employment and wealth for ALL!!!

  • nasir

    Today's modern economy many countries allow international currency markets a large role in determining the exchange rates of their curency, this does not mean that goverments are complete bystanders in the modern exchange systems. therefore,Somaliland government may still require interveining in currency markets to moderate sharp market shifts or to pursue limited economic or financial goals.

    however, we now hearing from the chairperson of somaliland's central bank that they attempting to keep somalilan currency fixed at a particual rate relative to the US which is bad and failed policy that will slow the economic development of the country.

    I agreed with the other gentelemen as well that we necessarily need reducing our dependency on foreign products, on the other hand our government must understand one of the most important forces affecting the supply and demand for the somaliland shilling is the general level of business activity in the economy.

  • Adan

    The New goverment Must state to plan for longterm development of the Somaliland Economy . What we need is the the local business community and the state to work together to start growth and local small scale industry. The central bank must keep the SL/US exhange on a reasonable level. Also the state must start New state fundede sector whether it is the Agriculture, Fishery, Mining, Oil or gas.

    Last but not least please ban all the int. NGO as they are parices which are their to keeep our people poor.

    Somaliland Guul

  • Fred

    You will find the Asian businessmen and moneychangers ripping off the Somali people. Whenever something like this happens in the 3rd world, they are usually involved.

  • cabdijibaar faarax

    walaal waxan ahay arday dhigta jamacada admas department of economics markaa waxan diyaarinayaa reseach paperkii waxaan qaatay topic ah trends of exchange rate in somaliland markaa hadad haysaan wax arinkaa khuseeya fadlan iga caawiya

  • khadar

    cabdijibaar write you own word why you speak a somatic it necessary to speak English but anther they don't understand but if you want to help the people exchange the language

  • RAKAD MXD

    waxaan ahay arday dhigta jaamacada gollis universty MS-IT DEPARTMENT markaa walal waxaan kaa qaatay xoogaaa infomartion ah ee walal e cafi maxaa yeelay waxaan lay diray reseach about the exchange rate in somaliland .

  • RAKAD MXD

    FADLAN II OGOLAADA WAXAN QAADATY COMMENT AAD LLEEDIHIIN IYO REPORT KA SI AAAN UGU DARO BUUG AAAN QORAAYO THNKS

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