Somaliland economy is in decline

Somaliland’s Ministry of Finance said business in the breakaway Somali region has declined, which has affected Somaliland’s economy.

“Business is at a standstill,” stated Sa’ad Ali Shire, Somaliland’s finance minister, at a press conference in Hargeisa yesterday.

According to his statement, Somaliland has two main sources of income, livestock and trade. Livestock income is doing well but commercial activities have slowed down due to their war against the SSC-Khaatumo state liberation forces, which the minister avoids to mention.

Indeed, seven months of indiscriminate bombing on Las Anod have affected its economy and emptied the state coffers. The port of Berbera is operating at a slow pace with a complete stoppage of goods destined for the eastern and southern Somali regions.

Thus, the minister knowingly stated inaccuracies when he singled out the recent fire at Wajaale market as one of the reasons for the decline in trade.

Uncertainty ahead

Mr Shire said the 2024 budget was in the works while his administration was still considering spending more money on defense and on elections expected to take place next year.

Somaliland’s economy took a hit when its army has been severely depleted by its 8-month effort to retake Las Anod. It is now being rebuilt with more recruitment and supply of heavy weaponry. President Musa Bihi is desperately seeking sources of financing for his army while local revenues are insufficient and the Djibouti’s despot, who is at his bedside, remains his only support.

This increase in the defense budget signals that Somaliland does not want to admit defeat and is preparing to resume its confrontation with SSC-Khaatumo State. This means more wars and uncertainty over the viability of the breakaway region as an autonomous region.

Another uncertainty is also about the elections timetable that divide the “central clan” in Hargeisa. President Musa Bihi is thought to hold on to his position and is creating distraction to organize an agreed timetable.

The question for Saad Shire is where the funding for these elections would come from as Somaliland western allies are slowly turning their backs on Musa Bihi’s administration.

Living on remittance and foreign aid

For the local civilian population, these politics have detrimental impact on their livelihood. Until now, they depended mainly on remittance from the diaspora and foreign aid. However, political polarization and the economy of war risk jeopardizing the relative peace they had so far.

Indeed, in his attempt to show that the breakaway region is economically and politically independent, he deliberately omitted foreign support, external aid and the government budget which amounted to $124 million in 2021 alone.

Moreover, every Somali has at least one relative abroad. Without their regular remittance, life would have been more difficult as they inject a staggering cash flow of approximately $1.3 billion into Somaliland’s economy.

However, COVID-19 and poor economic governance have worsened already uncontrolled inflation, which has driven up prices of consumer products. It is in such a context that World Food Program (WFP) aid, which served as a lifeline for certain disadvantaged communities, is being diverted by some Somaliland’s leaders.

Finally, Saad Ali Shire’s report follow the recent delegation from Somaliland to Djibouti led by Isse Kayd. His meeting with the Djiboutian president Ismail Omar Guelleh and President Hassan Sheikh Mahamud was aimed at securing a political deal for Somaliland that would secure additional money into its coffers.

Ahmed Said

Ahmed is a Somali civil servant and writes a lot about the affairs of northern Somalia where he hails from.