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Traders Hike Food Prices As The Dollar Keeps Declining Against The SL Shilling
Hargeisa, Somaliland, September 11, 2004 (SL Times) – The livelihood of hundreds of thousands of people in Somaliland is being threatened by a combination of nation-wide drought, a fastly depreciating US dollar and rising food prices.
With the purchasing power of the pastoral population in Somaliland already devastated by a 4 year drought, the depreciation of the American dollar by 21% of its value against the Somaliland Shilling in the last 3 months, has also contributed to the further deterioration of the living standard of the majority of Somalilanders. The situation was aggravated by the rise in food prices despite the fall of the US dollar from a high SL Sh 7,500 in early April to a low SL Sh 5,800 yesterday.
Somaliland households that receive regular financial support from relatives living abroad saw their income significantly slashed as a result of the depreciation of the dollar. Given that as high as 50% of households among Somaliland’s population of 3.5 million, relied for income support on remittances sent by relatives living abroad, the dollar’s continued slump, coupled with the hike in food prices, has been felt across the whole country.
The worst-affected by the crisis are people living in drought-stricken rural areas who, after losing most, if not all of their livestock, had up to now survived on small money remittances.
In urban areas where employment is scarce, many families are now threatened by the diminishing value of their remittances and soaring food prices. Almost all money transfers to Somaliland are made in US currency. The exchange rate of the dollar against the SL Sh has remained steady within the range of 7,000 – 7,200 for at least one year, before taking a dive as of last June.
Initially, the cause of the dollar’s deterioration was attributed to the influx of large amounts of the green-back into the money market by diaspora Somalilanders who started arriving in the country in June for spending their summer vacation here. Another factor was the drop in demand for the dollar as Somalilanders became unable to travel to Dubai for business, shopping or medication, following a UAE visa ban for Somalia passports.
Though most diaspora Somalilanders have already returned to their host countries, the US dollar continued to weaken against the Somaliland Shilling, reaching as low as 5,900 on Tuesday.
Meanwhile, the 50kg sack of rice that cost $14.5 in May is now sold for $17.5, while the 50kg sugar sack jumped from $15.5 in May to a current $17.
Astonishingly enough, the Somaliland Shilling bank notes have been in tight supply in the market in the last 3 months. It is not known yet why the Bank of Somaliland has not pumped any Shillings into the market to prop up the dollar.
Big traders argue that the rise in food prices has been prompted by the decision of the Ministry of Finance to increase import tax rates. The hike made Berbera Port uncompetitive in comparison with the far more inferior port of Bossaso, with more shipments being diverted to the latter by traders in the region because of law export/import customs duties.
So far, the government has not taken any measures to check the increasingly dwindling incomes of hundreds of thousands of its citizens. Nor has it shown any concern for the consequences that the current threats to the incomes of its people might have on the country’s future stability and progress.
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