Know Somalia’s Economy Before Starting A Business
Located in Eastern Africa and edging the Indian Ocean and the Gulf of Aden, Somalia is spread over 637,657 sq km. Somalia economy is largely agrarian with agriculture forming the backbone of the country. Somalia lacks in natural resources and therefore, it has to depend a lot on its agricultural sector. Most of the people in the nation are engaged in crop cultivation. The mineral reservoir of this country is also largely untapped. As a result, economy of Somalia is also one of the least developed and also commercially poorest in the world.
Somalia has witnessed several civil wars and floods. Due to the absence of a stable government and several devastating wars and outbreaks, the state has never been able to register steady economic progress. Economic history of this country is marred with violent war outbreaks, which have left millions of people homeless. It is due to the instability that the economic development of Somalia has continued to suffer for several years.
However, one good thing about the economy of Somalia has been the growth of the private sector. Although development of the public sector suffered due to weak government support and faulty administration, the private sector continued to stride. Several private companies sprung up in areas related to trade, commerce and infrastructure. Primary sectors, including agriculture, livestock and fisheries have also seen significant contribution from private players in Somalia. With the entry of new private players, the service industry also flourished. However, the growth of private sector did nothing to push the gross domestic product (GDP) per capita. As the estimates suggests, the GDP per capita of Somalia remains at $600.
Currency of Somalia has also suffered an adverse effect due to the absence of the central government authority. Lack of government authority has led to the debasement of the country’s currency value. In 2002, the Somali Shilling exchange rate had recorded a historic low of 30,000 per US dollar. The country also witnessed a fake currency racket, which grew in strength in 2007, and also fuelled Somalia’s inflation rate. The racket was also a result of the lack of government authority. The Somaliland shilling is the currency of the Republic of Somaliland and it is issued by the republic itself. However, this currency is not acknowledged outside the self-declared republic.
Recent economic reverses have left Somalia in deep trouble and people are found depending increasingly on remittances from abroad. Although livestock and agriculture are the main sectors, exports from these sectors are getting reduced drastically due to periodic bans imposed for concerns of animal health. Agricultural production in Somalia has also suffered due to drought and floods. War breakout also took a heavy toll on the agricultural and livestock production and exports. Fishing industry, which is among the revenue-generating sectors in Somalia, is also adversely affected by poaching and lack of concessions resulting from the absence of a stable and recognized government.
Till today, the economy of Somalia continues to face serious development challenges. Despite these, the country’ progress is better than other African nations in terms of the economic scope and infrastructure.
By Cynthia Loga
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