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Hiiraan Online
EDITORIAL
Monday, April 21, 2008
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Can US Dollar replace Somali Shillings? |
In normal situations, the cycle of the economic fluctuations bring about economic slowdowns, inflations and other natural macroeconomic problems. The whole world is on the verge of such periodic upheavals as its happening now in the US and other countries. Government institutions / officials are required to be vigilant of such occurrences. They are also expected to gently steer their nation in turbulent economic times. In almost all countries, central banks or their equivalents are the focal national institutions responsible for issues relating to money and inflation.
Also in normal situations, governments, weather capitalists or centrally planned economies, play a very important and ever-increasing role in the economic well being of their countries. Macroeconomics issues such as national income and output, investment, international trade, unemployment, and particularly issues related to money and inflation control have always been in the domain of government institutions.
Somalia is currently going through a crippling hyperinflation that causing unbearable economic hardships throughout the country. Even the relatively pro-TFG people of Punltand regions are taking their frustrations to the streets. Citizens as well as authorities should have been asking number of pointed questions about the crisis, such as what is the cause the current hyperinflation? Who was supposed to prevent it? What should the appropriate punishment be for those who fail to discharge their duties? Is this a natural economic cycle or is there something afoul here?
Luckily, on April 15, the Governor of Somali Central Bank o, Mr. Bashir Isse Ali, held a press conference in Mogadishu to address this acute economic crisis. Mr. Isse contended that the two main causes of the current problems are the rampant counterfeit money in circulation and the old and decaying Somali shillings which large numbers of the business community refused to accept. To tackle the slide of the Somali shilling from 15 000 shilling to one US dollar a year ago to the whopping 31, 000 shilling per one US dollar, the Chief Banker of Somalia acknowledged that the TFG plans o print new national currency.
The problem of the counterfeit shillings predates the TFG. Unscrupulous businessmen and all sorts of “authorities” were printing fake Somali shillings since 1991.Similarly, extensive economic problems stemming from the prolonged Somali civil war and its aftermath – the collapse of state institutions - played an important role in the current currency crises. Therefore, if one takes into account these broad realities and the fact that the Governor of the Central Bank of Somalia is known as an able economist and honest banker, one would find Governor Bashir Isse’s proposed remedies as plausible way out. For what else could the Governor do other than to suggest making secure banknotes for country?
What makes Mr. Bashir Isse’s proposed action plan as unworkable at this point in time, is the fact that Somalia has no functioning state institutions. In fact, even the Central Bank is not in a position to initiate even the initial groundwork research needed for this endeavor let alone the introduction and managing of a new and robust national currency.
To illustrate how the TFG and the Central Bank are unfit to introduce an effective national currency let us tell a story. It has been reported that, while the Governor of the Central Bank was out of the country, a senior employee of the bank took from the vault of the bank one hundred thousand dollars and deposited it in a private account with one of the Hawala in Biadoa. The allotted budget for the whole Central Bank was three hundred thousand dollars! It has also been widely reported that upon his return, the Governor, was unable to prosecute the culprit or recover the stolen money because powerful supporters of the employee obstructed his efforts and argued, “why prosecute only him, other higher ups in the TFG have taken millions of dollars, prosecute everyone, or do not single out our clansman.”
It is also a common knowledge that the TFG is unable to pay travel expenses of its senior officials. The UNDP and other donors often defray the costs in a way many TFG officials find humbling and unbecoming of self-respecting government officials. The TFG Prime Minister also admitted, not long ago, that the TFG militia / soldiers rob Mogadishu residents on a regular basis because the government has no revenue to pay them. Therefore, the idea of the TFG printing new shillings, which requires ten to twenty million dollars, might be a wish list on the part of the Governor rather than a looming policy plan. Besides, printing new currency in a situation where there are no effective institutions and oversight and officials are robbing the system with impunity, as the case of the Central Bank, would only result in a feast or unprecedented looting of the national treasure. This is a plunder Governor Bashir Isse would not approve of and has no power to prevent if he allows it happen.
If the currency problems of Somalia were the result of piracy imposed on the fragile nation / government, then one would be sympathetic to the TFG because it is a besieged transitional government, which inherited huge economic problems. What is puzzling and need an honest appraisal by all concerned are the real sources of the counterfeit money and the role of the TFG and other regional governments in this sordid affair of forging Somali currency.
Only the Central Bank of Somalia can print legal national currently. Even such endeavor requires close consultation and coordination with the relevant international bodies such ahs the International Monetary Fund (IMF) and the World Bank. However, it is clear from the media revelations provided in the links below that rather than the Central Bank, others are printing Somali shillings left and right.
The court case in the UAE (see the link below) proves that two top TFG leaders (not the Central Bank) had, in 2005, authorized and ordered the printing of one hundred and fifty billion Somali shillings! http://archive.gulfnews.com/articles/06/11/07/10080404.html . The letter in the following link further exposes the involvement of the highest echelons of the TFG leadership as well as aides whom they have entrusted the execution of this money-printing mission. /news/2006/may/somali_news4_7.aspx
Originally, Mogadishu based businessmen and politicians / warlords started the phenomenon of printing counterfeit Somali currency. They succeeded to ransacking the people of Mogadishu. Now it seems that the TFG and others based in Bosaso, the commercial city of Puntland, have become the new barons of the counterfeit making enterprise. The link below shows the pictures of one printing facility that made fake Somali banknotes in Bosaso. The Puntland police displayed these pictures after a police raid. http://www.ceegaag.com/Qoraalada/2007/July%202007/wasiirka_maaliyada_ee_dgpl_gagaa.htm. What is astonishing however; is that the President of Punltand region admitted on a BBC interview that his regional government has a printing facility that prints Somali Shilling for Puntand! The link below also shows a money forging deal that gone bad in Puntland, the adversaries are sadly the government and certain businessmen! http://www.puntlandpost.com/newspage.php?articleid=2025.
The link below also confirms that Puntland is a transit hub for the TFG printed clandestine currency printing operation. http://www.bbc.co.uk/somali/news/story/2006/05/060503_bossaso.shtml
In a normal situation, when others besides the Central Bank print national currency, the first resort will be the offices of the Attorney General and the Supreme Court. Unfortunately, both the Chief Justice and the Attorney General of the TFG were in jail from September until last week for embezzlement - according to their nemesis within the TFG leadership; others within the TFG leadership consider them as victims of trumped up charges.
Manufacturing Somali shillings is not a small enterprise that any ordinary person could do. Forging money requires a lot of money, knowledge, and political power. Those who have money, power and political connections are active in the counterfeit business while the poor in Somalia and particularly the people of Puntland who paid blood, toil and sweat to support the TFG / Puntland leaders are fleeced in a broad daylight.
Mohamed Dalmar, former Director of Central Bank of Somalia predicted what is going to come in his book "Monetary and Exchange Rate Policies 1960-2001" and stressed that the only way to curb this manmade and catastrophic crisis is:
· To have a genuine national reconciliation;
· To create an accountable NATIONAL government for and by all Somalis,
· To use of the US dollar in the interim period until the first two conditions are achieved;
· The printing of new Somali currency should be supervised ad guaranteed by international financial institutions such as the World Bank and the IMF;
If the powers in Somalia are not willing to see this simple truth and act on accordingly, perhaps the international community could force them to see – since the responsibility to protect is an international principle that Somalia is desperately in need and the international community is obliged to uphold.
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Related: The Banknotes of Somalia