19 May 2007 04:20 SOMALIA WATCH |
| SW News | |
The Effect of Fake Shillings on the Economy and the Poor Arlaadinet (14 Feb 2001) - The recent unanticipated hyperinflation has done substantial harm to economic efficiency and equity. Whereas 11 000 shillings would buy a dollar on last Wednesday, 15 000 were needed on this Wednesday, the currency's all-time low. The inflation rose high horribly decreasing the value of Somali Shilling. Inflation is again rampant and the price of everyday goods has soared, leading to demands that this practice to be put to an end once and for all. Such a reckless exercise might renew violence if food prices increased sharply. It hurts millions of people while few individuals benefited. While inflation is quite common to many economies but anticipated inflation creates fewer problems compared to unanticipated hyperinflation. Since 1991 there have been a number of attempts by factional leaders to print new banknotes, with which they could fund their rise in power and influence. Somali currency was printed, especially during UNOSOM’s presence, but traders were usually aware of its existence, and the amounts printed were never enough to cause major concern. The latest banknote shipment printed in Indonesia marked the seventh time in four years that businessmen have imported Somali shillings and has caught people by surprise. Somalia may soon face similar situation of Germany, Poland and Hungary faced in the 1920s. To buy a handful of groceries, they needed a shopping cart of currency. If that happens the Somali currency may soon collapse. Businessmen and "freelance" operators along with warlords have run the country, which does not have banks. Privatizing the national currency in this way can eventually have serious negative impacts on the economy, especially if it means dollarization. There was complete freedom of the foreign exchange market, the Somali shilling rules between Kenya and the Horn, with only a small part of the Northwest region using the SlSh. Therefore, apart from this area, there is a common market, and monetary union. If the Somali shilling is destroyed, there may be a delay before the dollar takes over. The most affected are small traders and thousands of internally displaced people (IDPs) in Mogadishu. Majority of IDPs was dislocated from their farms and houses in Lower Shabelle and sought refuge in Mogadishu by making makeshift homes in abandoned government buildings. With the latest influx of fake currency they are in verge of starvation. Without bargaining power as employee and lack of government to look after them, the IDPs are left to the mercy of ruthless businessmen. These people are systematically denied their right to lead a normal life by depriving the essential daily ration through inflated prices. This act constitutes gross human rights violation. Assigning the Culprit Four different local currencies circulate in Somalia, introduced by different political and regional groups. On several occasions since then new bank notes printed by various warlords have come into circulation. In 1996, Mohamed Farah Aydiid struck a deal with a Canadian printing company and a Malaysian (Adorna) intermediary for a massive number (165 million) of new banknotes. He received the first consignment, and used this to maintain the strength of his alliance. More recently, his son, Hussein, tried to do the same. In 1997, warlord Hussein Mohammed Aidid had millions of dollars worth of shillings minted in Canada and used them to pay for his gunmen and supporters to maintain his illegal occupation of fertile land of Bay region and Lower Shabelle. The interim government is reported to receive a cut of the proceeds from such deals and it relies on this percentage to pay civil servants, and rent for its offices. But though the money may keep the interim government afloat, it has ruined the fragile economy that operates in Mogadishu and in other regional centers including Baidoa and Bossaso. This is the second time that the interim government becomes involved with the importation of fake currency. Last October businessmen close to the TNG imported planeload of fake shillings. It was reported A/qasim Salat, the interim president, personally ordered the use of the money despite the protest from some of his cabinet member. On Tuesday, some of Mogadishu dailies reported that the interim prime minister, Mr. Galaydh, struck a deal with the money dealers and agreed to transfer 60 billions shillings to the government. At the same time the TNG issued press release condemning this reckless practice. The hypocrisy of TNG is apparent from; first its claim of not being involved in this shameful exercise while controlling the airport used to money trafficking, secondly, it is reliance on businessmen who are responsible for the trade of illicit currency. TNG use of new shillings for its expenses has similar effect - it will not bring any productivity to the economy. Malaysia, Indonesia and Canada are the popular countries that allowed the few Somali businessmen to profit from this unholy business in the expense of millions of poor families. Indonesian company, Pt. Pura Baru Kudus, is involved in printing new Somali bank notes in Jawa of Indonesia. It is said that more than US $ 4 million worth of Somali bank notes is being printed under fake license and authority from non-existing Somali government. While Malaysian and Canadian companies also printed and facilitated the shipment of large quantity of illicit currency. Notorious businessman Mohamed Abdulle Daylaaf and his infamous counterpart Hussein Goley are among several businessmen who are responsible for importation of fake shillings on several occasions. Conclusion Whether the Somali shillings is collapsed or has a chance to be rescued is depends on how people resist against the fake currency and what TNG will do with the money that is transferred to her. With Somalia's collapsed economy, almost 99% of unemployment rate with majority of the people have no assets, the circulation of newly printed fake money into the market will do irreversible damage to the economy and to the people specially the poor. It's early days TNG reiterated that the government is for the poor. To date it has failed to live to its promise. Before six months 1USD was exchanged with less than 1000 shillings. Now the shillings lost 40% of its value. The new fake currency must not be allowed to enter the market (burning is the only option) and those responsible (businessmen and TNG officials) must be tried for crime against humanity. On the other hand, a new currency may be introduced. Replacement of the national currency with dollars, or a new currency will, therefore, have a negative impact on business (by raising the cost of transactions), and on the poorest sections of the Somali population (due to inflation first, and the indivisibility of the US dollar in the country). There are also political costs to creating a new monetary union, which can hardly be afforded at this time. ___________________________________________________________________________________ SOMALIA: Government to buy up imported money NAIROBI, 14 February (IRIN) - The Transitional National government (TNG) of Somalia will buy newly minted money from the businessmen who imported it to try and control its impact on the economy. This was announced on Tuesday by the Prime Minster's Office, a senior official told IRIN. The government will buy 60 billion Somali shilling, about US $4 million dollars. In return, the businessmen involved have undertaken not to import any more money, the official said. In a move to fight the importation of newly printed money the government will soon announce the creation of a central bank, and the appointment of its senior officers, he said. Since 7 February, five planes arrived with consignments of newly printed Somali bank notes - reportedly from Malaysia - for a cartel of Somali businessmen. The money has caused hyper-inflation with local markets shutting down, and serious fluctuations in the exchange market, a local economist told IRIN. Interim Prime Minster Ali Khalif Galaydh, threatened legal action against those who try to import more money, Deutsche Presse-Agentur (DPA) said. "Whoever is again seen to be importing fake money will be brought to justice," he said in a press conference. He said the interim government "know the countries in which the money is printed and its routes towards Somalia and with the collaboration of the international police (Interpol) we will be able to stop it", DPA quotes him as saying. ____________________________________________________________________________________ Businessmen "Handed Over" Newly Printed Somali Shillings To The Government Mogadishu - The Somali Prime Minister, Ali Khalif Galeyr declared yesterday that a several-hour ministerial meeting unanimously agreed on the handing over the newly printed Somali shillings to the Transitional Government. In a press conference he held at Ramadan Hotel in Mogadishu, the Somali Premier asserted that the businessmen who printed the money reached an agreement with the government in which the money would be transferred to the government, adding that the government would pay the due compensation to the businessmen. The US dollar fell sharply against the Somali
shilling today after more than 60 billion Somali shillings were
handed over to Prime Minister Galeyr by the businessmen. Economist
described this step as one taken to the right direction,
and will help ease the inflation which affected the public. (HornAfrik). Source: HornAfrik Online
Feb 15 ____________________________________________________________________________________ Interim government confiscates fake bank notes Feb 14 (Xog-Ogaal) - The interim Somali prime minister, Dr Ali Khalif Galayr, held a news conference in Mogadishu yesterday. The premier disclosed that his government had confiscated a good portion of the fake currency printed recently and brought to the country by some Mogadishu businessmen. The amount impounded was 60bn Somali shillings. The businessmen will be compensated for the expenses they incurred in printing the money, the premier said. However, the premier declined to give details of the government's compensation plan. He said the businessmen had agreed not to repeat the act of printing money again, failure to which the government would take stern legal action against those found indulging in the unethical move. The government was making arrangements to print its own bank notes to counter the printing of fake bank notes by some unscrupulous business people. "We are concerned about the economic damage and social sufferings the fake currency has caused the people. The move was also a big blow to the interim government and we cannot tolerate a repeat of similar incidents," the Premier Galayr said... In Buro, Somaliland police have impounded a vehicle transporting a large amount of bank notes recently printed by Mogadishu businessmen. The Somaliland administration termed the move as a deliberate plot to ruin and destablize Somaliland's economy. The police have confirmed that both the owner of the illegal money and the driver of the vehicle were arrested and will soon be arraigned in court. _____________________________________________________________________________________ SOMALIA: Market dead from new currency NAIROBI, 13 February (IRIN) - A second batch of newly printed currency has arrived in Mogadishu. Local sources confirmed to IRIN that a second plane-load arrived on Sunday night, believed to have been printed in Malaysia by a cartel of Somali businessmen. "This was part of the money that arrived on 7 February", a local businessman told IRIN. The new notes are estimated at 90 billion Somali shilling, or about US $6 million dollars. "This will lead to hyper-inflation," a local economist told IRIN. Prices of food items and essential goods doubled when the first batch of new money arrived on 7 February. Mogadishu residents fear that prices will increase further. The local economist told IRIN that the new notes had not yet been released into the market, and that the yesterdays rate remained the same, with 15,200 Somali shillings to US $1. He described Bakara, the main Mogadishu market as "dead". Big traders have fixed their prices to the dollar, but small and medium traders have stopped trading completely, and are not selling anything, said the economist _____________________________________________________________________________ SOMALIA: President "upbeat" after overseas trips NAIROBI, 6 December (IRIN) - Interim President Abdiqasim Salad Hasan said on his return to the Somali capital Mogadishu on Tuesday that his trips to Qatar, Sudan, Libya, Djibouti and Ethiopia had been very successful. The president was described as being in "the most upbeat mood since being elected", sources close to the government told IRIN. He gave a brief speech to supporters, and later hosted a fast-breaking dinner for a group of people living in a camp for the displaced near his residence, the Mogadishu-based newspapers said. Abdiqasim's delegation was escorted from Balidogle airport, 90 km from Mogadishu, by 700 heavily armed militiamen on 50 trucks mounted with heavy weapons, the Associated Press agency (AP) reported. Osman Hassan, reporter for AP, said the heavy security presence was "a reminder of how far he [Abdiqasim] must go to restore order in Somalia". After attending the IGAD meeting in Khartoum, Abdiqasim said he had made progress in talks with regional leaders there, political sources in Somalia said. Ethiopian Prime Minister Meles Zenawi had suggested that Somalia's arrears be cancelled, a proposal which, he said, was indicative of the neighbouring country's concern for the welfare of Somalia, AP reported. (BALIDOGLE AND THE INFAMOUS 700 HEAVILY-ARMED MILITIA ON 50 TECHNICALS! SAME GROUP ESCORTING THE BILLIONS OF FAKE MONEY FROM, WHERE ELSE, BALIDOGLE AIRPORT! NOW YOU KNOW THE REST OF THE STORY!)______________________________________________________________________________________
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