From: Dr. Ali AM Barkhadle

11 April, 2000.

Do you remember the collapse of the dictatorial regime of Siad Barre? One of the main catalysts that brought down his governement were:high unemployment, run-away Inflation, a large current account deficit that went on for decades, a huge pile-up of external debt that ran into Billions of dollars, and a failing currency.

A poorly run country using the clan system to divide and rule led to the above economic problems. This same architecture is being used by the Arta Faction in its quest for garnishing sovereign control over Somalia.

The recent waves of fake money that has hit the streets of Somalia are yet to impoverish the already poor peasants and ultimately will lead to the flight of capital that can bring disasterous consequences for the whole of Somalia, including Somaliland and Puntland. This sorry state of the current currency system is hindering the Diaspora Somali community from investing in their motherland.

The Somali shilling which was in circulation at the time of the collapse of the Dictatorial regime still persisted with no Fiat or reserve backing, people used it just as a means of exchanging goods for the last eleven years, with the exception of Somaliland which opted for a quasi-existence of the older Somali shillings and Somaliland shillings. This new developments recently will lead to people not trusting the Somali shilling as a storer of value.

The main question is, who is going to monitor money supply with the inflow of fake money from rogue governments, and traders? I believe it is difficult. I think Somaliland has the option of using its own currency solely and rejecting any Somali shillings. Aha, again what is going to stop rogue traders from attacking the Somaliland shilling?, yes, you have guessed right, they can print the same money using the same technology that was used recently. Solution, there are numerous problems in managing currency issue and distribution but, the main problems are, security of maintaining the notes and the money required for printing and distributing this money. Four options are open for managing a stable currency(NB:other complex means e.g currency Boards et al cannot be applied in Somalia in its current form):

1. Is to resort to batter trade with valuation of goods for goods as was practiced in the old ages.

2. Is to outright Dollarize the economy by accepting dollars for any form of financial transaction, this has proved successful in Ecuador and El-salvador. This may be difficult especially with lower denominated notes that are not available in large quantities but, after all the economy is almost 50% Dollarized, with the remaining 5% Saudi Riyals, 20% UAE Dirhams and 25% Somali shilling(with this figure likely to rise recently). The main advantages of Dollarization is to put an end to inflation, and wage rise demands.

3. Is to completely Dirhamize the whole economy by accepting the UAE Dirham for any form of exchange, since monetary policy is not an issue for Somalia at the moment. Since Somalia does most of its trade with the UAE and lower denominated notes and coinage can be accessed easily since there are daily flights to the UAE. I believe the UAE will appreciate its money being used as an International reserve currency of which it would kindly wellcome.

4. The quasi-existence of Dollars and Dirhams for any form of transcation.

I hope this solutions will ameliorate the current sorry state in Somalia until a stable and transparent government can be found. As for Ismael Omar Geele, David Stevens, the Arta group, and the Arab League, its high noon for them and should resign in earnest for bring about this financial chaos.

The Author is a Businessman, an Investor in Somalia, and a Management Consultant and can be contacted at amsr@optusnet.com.au or amsali@hotmail.com