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Friday, February 10, 2017

Somaliland- How an oasis of stability became a powder keg

(Africa Intelligence) - Successively struck by a financial crisis, a drought and the effects of the regional machines of its neighbours and the Gulf states, Somaliland, long an island of stability in a very troubled region, is struggling to maintain that status.

And as he makes every effort to stay in office as long as possible, President Ahmed Mohamed Mahamoud , aka Silanyo, is only making matters  worse in a country on the brink of breakdown.

Fixed exchange rate + inflation = re-pression. 
The equation may seem banal, but it reflects the absurd situation in which banking operators and Somaliland’s population find themselves.

Although a free market is enshrined in the constitution, on Jan. 24 a cabinet meeting fixed an exchange rate of 6,800 shillings to the US dollar, a decision that was published in a presidential decree. On Jan. 21 and 22 two huge demonstrations were held in two of Hargeisa’s biggest marketplaces to protest hyperinflation – at the time a dollar bought 9,000 shillings. Traders ended up refusing to conduct any transactions in shillings. Amid all this palaver, on Jan. 26 the police killed the detained chairman of the Money Exchangers Association, Abdilahi Ali Barre, who had been arrested for refusing to apply the fixed exchange rate. It was in this context, aggravated by two years of drought, that the head of state proclaimed the establishment of the National Commission on Inflation.
On Feb. 1, on a trip to Berbera, this body had the local director of the Somali financial services and money transfer company Dahabshiil, Saleban Abdillahi Adib, thrown into jail on the grounds that he had refused to deposit shillings stored in his agency’s safes with the central bank. In addition, the presidential decree imposed limits on transfers exceeding $100 and banned some other transfers altogether. It also ordered operators like Dahabshiil, Telesom, Omar, Deero, and Premier, to stop speculating on the shilling-dollar exchange rate. The panic is such that Telesom customers – some 80 percent of Somalilanders have a sim card and an electronic dollar account with this company - have withdrawn their deposits en masse, obliging Telesom to charter two cargo ships containing dollars from Djibouti. Discontent is growing every day and the decision to postpone the presidential election
scheduled for late March until October has just made matters worse.

UAE base + Egyptian soldiers = Ethiopian intimidation.
Diplomatically, the situation in Somaliland resembles an equation with many unknowns. Since a UAE team visited Berbera in early January to set up a military base , Silanyo has failed to assuage Ethiopian Prime Minister Hailemariam Desalegn, who is worried about the UAE’s plans to hand the base over to an Egyptian military contingent. Addis Ababa and Cairo are at loggerheads over the sharing of the River Nile’s waters in relation to Grand Ethiopian Renaissance Dam . Moreover, the war in Yemen now threatens Somaliland. Iran has supplied - via Bossaso in Puntland – Yemen’s Houthi rebels with Russian SCUD missiles that put Somaliland within reach of the fighting in Yemen. Hargeisa is concerned that the Emirati troops stationed on its territory might be targeted by the belligerents on the other side of the Red Sea. But they are even more afraid of alienating the Houthis because Yemen is Somaliland’s second biggest trading partner after Ethiopia. It is even the primary source of dollars in Somaliland’s economy: Yemen buys 90 percent of Somaliland’s cattle, which it re-exports it to the Gulf states.


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