Somaliland: Alleviation of Inflation and Boosting Up Economic Growth


Somaliland occupies an area of 176,120 square kilometers. The country is rich in natural resources such as abundant marine life, livestock, rare minerals and vast unexploited arable lands. There are also highly prospective hydrocarbons exploration works going on in many Somaliland regions. Tourism is another promising means of economic growth for Somaliland, because it is a peaceful country with beautiful and breath-taking landscape, and it has hundreds of miles of untouched white sand beaches. Somaliland is host to many archeological sites. Not only have that, but thanks to Somaliland’s geographic location, it can easily serve as one of the best trade and air travel hubs in the world. Nonetheless, the Somaliland economy is still very much dependent on the export of livestock to the Gulf countries, which is a fly-by-night market.
In the recent decades, Somaliland was harshly affected by the global warming blight. The occurrences of repetitive droughts have become a pattern of normalcy in this country.
There are ongoing debates in Somaliland on ways to prevent or ameliorate the unforgiving effects of future droughts, but so far, there is no concurrence on a tangible plan. Even worst, the country is ailing with ever-growing inflation. In the short term, there are inescapable few steps that the government must take to perk up its national economy and bring inflation to its knees.
1. Trade disparity with Ethiopia
Ethiopia is one of the closest allies and neighbors of Somaliland. It is a landlocked country and Somaliland is one of its gateway countries to the world. Furthermore, Somaliland acts as security buffer zone for Ethiopia.
Somaliland is the number one importer of Ethiopia products, not only Kat, but it also imports other agricultural products from Ethiopia. On the other hand, Somaliland exports nothing to Ethiopia and this is a leading root cause of the skyrocketing inflation in Somaliland. Consequently, this Ethiopian export surplus must be brought down to an acceptable level, because the Somaliland economy will no longer be able to tolerate this Ethiopian trade inequality.
For those reasons, the Somaliland-Ethiopian economy and security cannot be easily divorced from one another, thus there needs to be a fair trade agreement between these two sisterly countries.
Somaliland needs to become a major supplier of much needed marine products to Ethiopia. The government must seek and encourage both national and international investors to jump in and invest in the Somaliland’s seafood production industry.
Somaliland needs both local and international investor in the fisheries and salt production sectors. For example, we need people to invest on the fishing infrastructure such as cold storages, transportation means and seafood processing factories. This project can easily get off the ground; it will create jobs, will earn hard currency for the country and it will likewise reduce inflation.
2. The Kat (Qat) Problem
One fact that is recognized by all is the negative impact of Kat on the Somaliland economy. The government has to look at ways of regulating the Kat imports. The quantity of Kat imports can be limited, tax hikes can be introduced, and it can only be permitted to be imported by air. This will boost the government revenues and keep a strict watch on the quantities of Kat coming into the country.
There must be an enactment of regulations, were by Kat is not allowed to be sold inside major cities and towns. Special Kat markets must be created in the outskirts of cities and towns. These will dramatically reduce the availability, accessibility and consumption of Kat. Members of the armed forces and civil service must be prohibited to use Kat. These regulations will equally trim down the health, social and economic tribulations to the Somaliland society.
3. Agriculture and Livestock
Another short term project that needs to start as soon as possible is in the area of agriculture and livestock. These two economic areas are mutually dependent on water supplies. First and foremost, the government must think of ways of reasonably exploiting its underground water and not only that but it must also efficiently and properly manage its rain waters. The government must send experts to examine the visibility of rehabilitating the Chinese wells along the Burao – Somalia road. Finally, livestock markets other than the Gulf countries must be explored.
4. Reduction of Taxation on the imports

To generate more revenue, the taxation on imported goods must be reduced, this by itself will increase the volume of imported goods through Somaliland ports and as consequence Somaliland ports will be able to compete with other ports in the region.

5. Investment on light industry

Somaliland needs to invest on light industry; it spends millions of dollars annually on imported produce. One good example is the imported cement. There is abundance of good quality deposits and in the vicinity of Berbera port. Somaliland can single handedly supply the regional needs of cement, but instead it pays hard currency to import cement from elsewhere. Some will argue that with the current energy costs it is impossible to establish a fully fledged light industry in this country. That supposition is completely wrong, because we can obtain a low cost energy and reduce our dependency on foreign oil by utilizing our Allah given renewable energy such as solar energy.
In conclusion, I think these baby steps will go a long way in improving the Somaliland national economy and will bring the inflation numbers to the bottom. These projects will also alleviate our dependency on foreign imports, create jobs and will increase our chances of attaining food security.
Dr. Yusuf Dirir Ali, MD