WHAT SHOCKS ARE HOUSEHOLDS VULNERABLE TO?

Apart from the seasonal changes noted above, households are vulnerable to a number of potential shocks. Civil strife and insecurity are obvious potential shocks, given the history of Hargeisa, and this has the potential to affect all households in all wealth groups. However, due to the political progress that has been made in recent years, this shock is not currently regarded as likely, at least in the short to medium term. Exchange rate depreciations that lead to increased shilling costs of imported food and non-food items are a particular problem for poor households, if their wages and profits do not keep pace with the changes. In the two-week period after this assessment was conducted, the exchange rate rose from SlSh 6,700 per US dollar to SlSh 7,300 per US dollar.

Any changes that negatively affect the major sectors in the urban economy will result in a general slowdown of trade and market activities and will affect many households throughout the wealth spectrum. Examples include:

-- restrictions on trade with Ethiopia and other countries that cannot be circumvented (the current livestock ban is one example),
-- restrictions on or a reduction in remittances from abroad (due to increased financial regulation), and
-- decline in the construction sector (which could be the result of a decline in remittances or because of the periodic bans imposed by the government).

Households in both the formal and informal sectors, and in all wealth groups, are vulnerable to the illness or death of (or divorce from) the main income earner, and this can result in a major drop in standard of living. One mechanism that households employ to cope with negative shocks is to reduce expenditure, or to switch expenditure to cheaper goods, which is obviously easier for wealthier households. Even poor households in Hargeisa have some room to squeeze their non-essential purchases, but it is questionable whether very poor households have. A second mechanism is to seek additional income by sending additional household members out to work, by working longer hours or more days per week, or by seeking additional gifts from relatives and friends both locally and abroad. A third mechanism is to reduce the number of household members dependent on the main earners. One or more household members might migrate to other areas or even to other countries, or be sent to live with or work for better off relatives.
 

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