Somalia's monopoly money

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Cairo Times, Egypt, 24-05-2001

With no government to issue banknotes, every Somali that can afford it prints his own - with devastating effects on the economy

It might not be the first thing that crosses one's mind, but when the Somali state dissolved ten years ago, the country also lost its Central Bank. Since then, businessmen have grown used to printing the national currency themselves--originally not a bad idea: after years of use the banknotes literally fell apart. Groups of traders sometimes even acted as a kind of Central Bank, issuing new money in controlled portions and even buying back excess shillings to stabilize the exchange rate.

These days, however, businessmen have stopped acting so conscientiously. Every new shipment of money is hence a disaster for the local market, and inflation is spreading quickly. One year ago, the exchange rate was 7500 Somali shillings to one US dollar; this spring the rate rose to 20,000 shillings before it stabilized at 18,000--and there are still some traders who think the shilling is overvalued.

Acting as a real barometer of the Somali economy, capital Mogadishu's Bakara market even stopped trading for a few days due to the risk of increased inflation, after food and other basic needs had already doubled in price over the past few months. While a kilo of sugar still traded for 3500 shillings in December 2000, now it has gone up to 6000. The real danger with the hyperinflation is that shopkeepers no longer want to be paid in Somali currency, but will only accept American dollars. The poorest Somalis, especially those who get no money from family abroad, are suffering the most from this dollarization of the economy.

The Somali economy mainly depends on exporting cattle, charcoal, and frankincense (the incense used in churches). Seventy percent of the population are nomadic shepherds trading goats and camels. But following last year's outbreak of Rift Valley Fever, their main customers in the Gulf banned the import of cattle from the Horn of Africa, and Somalia suffered the most, with prices dropping dramatically due to an abundance of cattle. Only this month did the Gulf states finally lift the ban on Horn cattle, as Europe is experiencing a double epidemic of Mad Cow and Foot and Mouth diseases. For many Somali herdsmen it will nevertheless be too late. Somalia's weakest animals and people already died during the drought of 2000.

The famine early-warning system of the American aid organization USAID recently noted the risky food situation of many Somalis. Prices of grains are so low that farmers refuse to grow any. According to aid organizations, the local markets are flooded with smuggled food aid diverted from famished Ethiopia.

The new government of Somalia is eagerly looking for a solution to the economic problems the country is facing. Somalia has had a transitional government since last August, but that doesn't mean Somalia's problems are over, as most clan leaders and warlords do not accept the government. The country still is a wasp's nest of leaders whose influence is based on firepower.

What was once Somalia has been cut up in three pieces. In two of these, life is relatively peaceful and the people prosper. Somaliland in the northwest declared independence in 1991. Puntland in the northeast did the same in 1998. Only south Somalia is still hopelessly divided, with south Somali powerbrokers and the transitional government fighting each other and both proclaiming an undivided Somalia.

The interim-government, nevertheless, is trying to establish their leadership by solving the economic crisis. This spring, it bought some US$4 million worth of fake Somali money imported by local businessmen, but this represents only the tip of the money mountain. Last year at least 300 billion shillings were imported, and a new planeload of freshly printed banknotes still arrives in Mogadishu every two weeks.

The reprinting of banknotes is nothing new in Somalia. At the start of the civil war Mogadishu warlord Ali Mahdi simply decided to print the new shilling. The control of notes led to one of the worst battles the capital has ever seen. His infamous rival General Mohammed Farah Aideed also had money printed, but died in 1996 shortly after the first batch of notes arrived. His son, the American ex-marine Hussein Aideed succeeded him, but never really had enough money to do the same. He satisfied himself with demanding percentages as protection money.

The transitional government has asked Interpol to help them stop the fake money, but the international police organization can not do much. Technically speaking the money is not fake at all. Thanks to General Aideed, the Malaysian firm Adorna owns the original printing plates, so that now everyone who wants to pay for it can have Somali money printed. One billion Somali shillings costs around US$5000.

Somaliland and Puntland are also suffering from the money imports. In both countries people still pay with the old Somali shilling.  Although there were demonstrations in Somaliland to have the Somaliland shilling as the country's only legal tender, the currency is currently available only in capital Hargeisha and port Berbera. The Somaliland government is having problems paying its 4000 civil servants and national army, and last January thirty local development projects had to be halted because of money shortages.

Nevertheless, not everyone suffers from the crisis. Businessmen in south Somalia are currently trying their best to invest their dubiously earned money. Fifteen Somali traders recently started a new airline, Air Somalia, each putting in US$50,000. With an ancient Tupolev 154 for international flights, and two Antonovs for local flights, it is the first purely Somali airline. There is also much money being invested in the reconstruction of the capital of Mogadishu. As the transitional government has already said it wants to issue new money by the end of the year, businessmen want to be ready for a more stable environment.

While some Somalis spoke about their confidence and hopes for the future after the transitional government was elected by strengthening the shilling, others are still cynical. The price of a kalashnikov rose from US$130 to US$200, bullets went from 15 to 25 cents, and a nice piece of double-barreled anti-aircraft gun went up from US$26,000 to US$30,000.

Somalia is still not very safe, with the transitional government anything but firmly established. According to critics, the government is full of war criminals from the old regime of dictator Siad Barre. Interim president Abdulqasim Salat Hassan for example headed several different ministries under Barre from 1973 onwards. Shortly before the dictator fled to Saudi Arabia in 1991, Hassan even became vice-president and minister of internal affairs.

Others say the transitional government is under too much external influence. The supreme irony is that the warlords who are President Hassan's fiercest opponents have created a counter government under the auspices of Ethiopia, even though Ethiopia has for many years occupied a piece of Somalia and also helped Puntland to become autonomous.

Regardless of all the political unrest, it is still the economy that moves Somalis the most at the moment. The government of President Hassan has asked international financial organizations to help them start up a new Somali Central Bank, but with regular street battles around the corner, the organizations are not too happy to oblige. The recent kidnapping of four western aid workers of Doctors without Borders also did no good. The United Nations Security Council is researching the possibilities of sending a civilian peace-building mission to Somalia, but the execution of the idea has been shelved temporarily due to fierce vocal resistance from the warlords.

After decades of nastiness, the common Somali knows he can't count on any help from people with political or economic power. Citizens of Puntland's capital Bossaso recently gathered in the local football stadium to pray: for rain and against fake money.

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