Wednesday,January 30, 2013
By Ali Adam
Unregulated currency exchangers at the Bakara market in Mogadishu. [Ali Adam/Sabahi]
People returning from the Somali diaspora are bringing a lot of dollars into the country, a sign of the improved security situation and Somalis' willingness to invest and rebuild.
But the influx of foreign currency is also causing a decline in the value of the dollar against the shilling, which is in short supply, and raising the cost of living for many Somalis.
Ali Omar, a 37-year-old foreign currency trader in Bakara market, said the value of the dollar is falling rapidly against the Somali shilling. Two weeks ago, $100 was worth 2.2 million shillings, but is now only worth 1.8 million, he said.
"Every time there is peace and calm, the value of the dollar goes down," he told Sabahi. "I think the reason is all these people who are coming to Mogadishu daily and bringing dollars. There is a scarcity of Somali shillings."
Even though the returnees have increased job opportunities by founding businesses, fluctuations in currency exchange rates have exacerbated problems for local residents.
While dollars continue to flow into the country, new shilling notes have not entered the market since the Siad Barre regime, which fell in 1991. New notes have been printed in Sudan, but the currency has yet to be circulated as Somalia works to strengthen its banks.
Because of this discrepancy in availability, the dollar is losing value against the shilling. Goods are priced in shillings, which means that Somalis who receive remittances in dollars must convert the money before making purchases.
Adding to the volatility of the market are independent currency exchange traders who are unregulated and set their own rates.
Isse Abshir, a 32-year-old Mogadishu resident, said he is troubled by the decline of the dollar's value.
"I have a family of five and my salary is $150, which used to be 3.3 million Somali shillings when exchanged," he told Sabahi. "The $150 is now 2.7 million Somali shillings, which is not enough for my family."
Hussein Abdikadir, 27, who has a clothing and shoes store in Mogadishu's Hamar Weyne district, said the fact that prices of goods have not adjusted with the currency fluctuations is making life difficult for people.
"People are bewildered by the decline of the US currency [against the shilling] and sales have recently gone down," he told Sabahi. "The biggest problem is the cost of food that has not changed in any store."
For example, he said $1 used to buy enough shillings to purchase a kilogram of sugar. Now, however, he needs $2.
"Any salaried employee, whether the person works for the government or anyone else, is paid in US dollars," Abdikadir said. "Also, there is a dollar influx from people who want to invest in the country, particularly in Mogadishu. All these reasons can be blamed for the inflation that is taking place."
Abdikadir urged business owners to adjust the prices of food in line with fluctuating exchange rates to help the struggling poor population.
President Hassan Sheikh Mohamud vowed to strengthen the Central Bank of Somalia as part of his comprehensive goals to develop and stabilise the economy, but has not yet announced any details about his strategies to address the ongoing issues with Somalia's currency.