3 May 2013

Somalia: Citing Currency Crisis, Puntland to Pay Govt Salaries in U.S. Dollars

Garowe — Puntland government in northern Somalia has announced that it will pay government salaries and expenses in U.S. dollar, due to the currency crisis that hit Somalia in early 2012.

Puntland Finance Minister Farah Ali Jama addresses reporters at his Garowe office, May 2, 2013

Puntland Finance Minister Farah Ali Jama, speaking to reporters at his office in Garowe on Thursday, said that the Somali Shilling's value has shifted dramatically over the past year due to a number of factors.

"Puntland government managed a steady Shilling-Dollar exchange rate at 30,000 Shillings per U.S. dollar between 2009 and 2011," said Minister Jama, adding: "However, a sudden shift occurred after U.S. dollar hard currency entered Mogadishu markets in 2012 and many Puntland traders took Shillings to southern Somalia to exchange for U.S. dollar."

Continuing, the Finance Minister noted that this development "has impacted Puntland government, export market, and local people who lived on Somali Shilling earnings".

Minister Jama said that the Puntland government has issued a number of decisions aiming at stabilizing the state's economy.

"To use the U.S. dollar as a baseline for government salaries and expenses, while in the past [the government] used Somali Shilling currency as a baseline. Second, to regularly pay off salaries and expenses each month under the new system. Third, to conduct a budget review once the Puntland Parliament opens for the June 2013 session. Fourth, to conduct an awareness campaign with businesspeople and local industry aimed at managing inflation. Fifth, to engage local traders to use actual value for market prices and to immediately stop inflating prices, which is prohibited in Islam as interest, and to utilize the aid of Islamic scholars in discouraging such business practices," according to the statement from Puntland Ministry of Finance.

Puntland President Abdirahman Mohamed Farole encouraged Somali President Hassan Sheikh Mohamud, who visited Garowe on April 28, 2013, to print new Somali Shillings and strengthen the country's Central Bank in order to stabilize the economy.

Currently, 20,000 Somali Shillings is exchanged per U.S. dollar, but market prices have remained high at the former exchange rate of 30,000 Shilling per U.S. dollar.

Puntland officials have previously explained that the government is paying an additional 30 % per each salary and expense cost, due to the sh ift in the exchange rate.

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