SOMAL
NK
OF SO
IL
D
BA
KA
AN
AN
L
LI
RA
LA
ND
CENT
BA
M
A
Bank of Somaliland
IMPACT OF COVID-19 ON
SOMALILAND ECONOMY
April 2020
Bank of Somaliland
Impact of Covid-19 on
Somaliland Economy
2
Impact of Covid-19 on Somaliland Economy
Bank of Somaliland
TABLE OF CONTENTS
EXECUTIVE SUMMARY. ���������������������������������������������������������������������������������������4
1..INTRODUCTION������������������������������������������������������������������������������������������������ 7
2..OVERVIEW OF COVID 19 IMPACT ON GLOBAL ECONOMIC GROWTH
����������������������������������������������������������������������������������������������������������������������������������� 7
3..IMPACT OF COVID 19 ON AFRICAN ECONOMY. ������������������������������������ 9
4..ECONOMIC IMPACT ON SOMALILAND �������������������������������������������������10
4.1. Impact on International Trade�������������������������������������������������������� 10
4.1.1. Impact Somaliland imports���������������������������������������������������10
4.1.2. Impact on Somaliland export����������������������������������������������11
4.2. Impact on Remittance Flow������������������������������������������������������������ 11
4.2.1. Situational Analysis ��������������������������������������������������������������������11
4.2.2. Transaction Analysis�������������������������������������������������������������������13
4.3.
4.4.
4.5.
4.6.
Impact on Financial Flow from Livestock������������������������������������ 14
Impact on Exchange Rate ���������������������������������������������������������������� 15
Impact on Employment Rate �������������������������������������������������������� 15
Impact on Fiscal Measures (Policy)������������������������������������������������ 16
5..CONCLUSION �������������������������������������������������������������������������������������������������17
6..MONETARY & FISCAL POLICY RECOMMENDATIONS. �����������������������17
Impact of Covid-19 on Somaliland Economy
3
Bank of Somaliland
EXECUTIVE SUMMARY.
At the time of writing on 26th
April, 2020, COVID-19 cases have
exceeded 2.8 million cases and
are increasing quickly around
the world1. To reduce infection,
governments have moved to
stricter social distancing, with
“shelter in place” orders in many
areas including Somaliland where
the Ministry of Health Development
confirmed the existence of Six cases
of COVID-19. This restriction has
driven rapid aggregate demand
declines—among the deepest in
recent times—that are being met
by attempts at bailouts.
The
COVID-19
pandemic
is
inflicting high and rising human
costs worldwide. Protecting lives
and allowing health care systems
to cope have required isolation,
lockdowns,
and
widespread
closures to slow the spread of
the virus. The health crisis is
therefore having a severe impact
on economic activity. As a result of
the pandemic, the global economy
is projected to contract sharply by
–3 percent in 2020, much worse
than during the 2008–09 financial
crisis2
1 WHO, COVID-19 Dashboard 15 April 2020
2 IMF, World Economic outlook April 2020
4
Impact of Covid-19 on Somaliland Economy
Bank of Somaliland
Initial United Nations Economic
Commission for Africa (ECA)
estimates suggest Africa will face
an immediate decline in GDP
growth from 3.2% to 1.8% in 2020
as a result of Covid-19, but with a
further adverse impact if Covid-19
is not contained in the short-term.
IMF lowered its forecast for SubSaharan Africa’s GDP growth in
2020 to -1.6% from a previous
forecast of 3.1%.
The major sources of economic
growth
for
Somaliland
are
Remittances funds from the
Somaliland diaspora in Western
Europe and northern America
and the Gulf Countries, the
export mainly livestock, and the
local small and medium business
enterprises activities.
After the outbreak of Covid-19,
a significant reduction of the
remittance inflow to the nation
is expected to decline due to the
global lockdowns that may bring
the loss of jobs for the diaspora
community and the closure of
financial institutions such as banks
and money transfer operators.
The total estimated remittance
flow to Somaliland in 2018 was
$1.4 billion3. Remittance which
contributed more than 51% of
country GDP4 in 2018.
Between January and December
2019, Somaliland exported 1.6
million heads of livestock worth
of 126 million dollars which is
equivalent to 60% of the total
value of 2019 export. Although
Saudi Arabia declared recently the
importation of a half million heads
of Somali livestock for meeting its
local needs of meat consumption,
If the Hajj is banned this year by
Saudi Arabia due to the Covid-19
crisis, it will result a great loss for
export.
On the other hand, Somaliland’s
imports which are mainly from
china, India, UAE, Egypt and
Turkey are expected to decrease
-8.2%7 in 2020 based on
IMF Predictions on developing
countries’ import volume negative
growth rate due to supply chain
disruptions, and this will have an
adverse effect on fiscal capacity,
monetary a short-term exchange
rate volatility, and unemployment
rate. In Somaliland, import duties
contribute around 80%5 of the
total revenue for the government
while only 20% comes from Inland
Revenue.
As a key policy response, the
government of Somaliland should
3 Source: Financial Institutions Supervision Unit, Central Bank of Somaliland.
4 The GDP of Somaliland in 2018 was $2.573 billion (Source: CSD, MOP&ND).
5 Central Statistical Department- Ministry of Planning and National Development and Ministry of Finance.
Impact of Covid-19 on Somaliland Economy
5
Bank of Somaliland
carry out some fiscal as well as
monetary and macroeconomic
measurements including
◊ Encouraging bank lending to
households and SME.
◊ Temporary easing of bank
provisioning needs and of bank
loan classification rules (i.e.
extra 60 days to be classified as
non-performing).
families.
◊ Support for hard-hit sectors,
including an exemption from
sales tax to SMEs
◊ Demand
support,
including
spending on public works.
◊ Anti-price
gouging
policies,
including price controls for food
and medical supplies.
◊ The support for workers and
vulnerable
groups
through
increased transfers to poor
6
Impact of Covid-19 on Somaliland Economy
Bank of Somaliland
1. INTRODUCTION
The increasing spread of the
coronavirus across countries has
prompted many governments
including
the
Republic
of
Somaliland
to
introduce
unprecedented
measures
to
contain the Pandemic. These are
priority measures that are imposed
by a sanitary situation, which leave
little room for other options as
health should remain the primary
concern. These measures have
led to many businesses being shut
down temporarily, widespread
restrictions on travel and mobility,
financial market turmoil such as a
disruption of remittance channels,
an erosion of confidence and
heighted uncertainty. In a rapidly
changing environment, it is
extremely difficult to quantify the
exact magnitude of the impact of
these measures on GDP growth,
but is clear that they imply sharp
contractions in the level of output,
household spending, corporate
investment
and
international
trade.
This
Paper
provides
illustrative estimates of the initial
direct impact of shutdowns,
based on an analysis of sectorial
output spending and consumption
patterns across all countries in
general and in particular the
Republic of Somaliland.
2. OVERVIEW OF COVID
19 IMPACT ON GLOBAL
ECONOMIC GROWTH
With more than 2.8 million
confirmed cases of COVID-19
on April 26, 2020, businesses
are coping with lost revenues
and disrupted supply chains as
factory shutdowns and quarantine
measures spread across the
globe, restricting movement and
business activity. In this modern
world, all the economies of the
world are closely integrated. That
is if anything happens in any part
of the world it would have medium
to high level impact throughout the
world. The COVID-19 pandemic
has pushed the world into a
recession. For 2020 it will be worse
than the global financial crisis. The
economic damage is mounting
across all countries, tracking
the sharp rise in new infections
and
containment
measures
6
put in place . As a result of the
pandemic, the global economy is
projected to contract sharply by
–3 percent in 2020, much worse
than during the 2008–09 financial
crisis7. The tourism sector alone
faces an output decrease as high
as 70%8.
An approach to identifying the
6 International Monetary Fund: An Early View of the Economic Impact of the Pandemic in 5 Charts
7 International Monetary Fund: World Economic Outlook, April 2020
8 OECD APRIL 2020, New OECD outlook on the global economy, and evaluating the initial impact of COVID-19
Impact of Covid-19 on Somaliland Economy
7
Bank of Somaliland
potential immediate impact of
widespread shutdowns is to look
at detailed categories of output
and identify the sectors most
directly affected by containment
measures including the following:
◊ Within service sectors, activities
involving
travel,
including
tourism, and direct contact
between consumers and service
providers, such as hairdressers
or
house
purchases,
are
clearly adversely affected by
restrictions on movement and
social distancing.
◊ Most
retailers,
restaurants
and cinemas have also closed,
although takeaway sales and
on-line sales may prevent a full
cessation of activity in some
businesses.
◊ Non-essential
construction
work is also being adversely
affected, either because of
containment policies affecting
labor availability or because
of temporary reductions in
investment.
◊ The direct impact of lockdown
measures
is
smaller
in
manufacturing sectors, some
of which are less employment
intensive. Complete shutdowns
are occurring though in producers
of transport equipment, often
because
of
difficulties
in
obtaining necessary inputs from
suppliers in other countries.
◊ Additionally, urban consumption
and expenditure (of food,
manufactured goods, utilities,
transport, energy and services)
is likely to experience a sharp
fall in light of COVID-related
lockdowns
and
reduced
restrictions
The World Bank Group, including
IFC and MIGA, is prepared to deploy
up to $160 billion over the next
15 months to support COVID-19
measures that will help countries
respond to immediate health
consequences of the pandemic
and bolster economic recovery
and growth. The broader economic
program will aim to shorten the
time to recovery, create conditions
for growth, support small and
medium enterprises, and help
protect the poor and vulnerable9.
The IMF director stated that
in order to step up emergency
finance—nearly 80 countries are
requesting IMF help—and IMF is
working closely with the other
international financial institutions
to provide a strong coordinated
response10.
containment measures on economic activity.
9 World Bank Group and Covid-19, April 2020
10 IMF Managing Director Kristalina Georgieva’s Statement Following a G20 Ministerial Call on the Coronavirus
8
Impact of Covid-19 on Somaliland Economy
Bank of Somaliland
3. IMPACT OF COVID 19 ON
AFRICAN ECONOMY.
With more than 20,316 confirmed
cases of COVID-19 in Africa
on 26 April 2020, businesses
are coping with lost revenues
and disrupted supply chains as
factory shutdowns and quarantine
measures spread across the globe
and in Africa, restricting movement
and business activity11. Initial
ECA estimates suggest Africa
will face an immediate decline in
GDP growth from 3.2% to 1.8%
in 2020 as a result of Covid-19,
but with a further adverse impact
if Covid-19 is not contained in the
short-term.12
Trade is a significant conduit for
this negative impact through three
transmission channels:
Compressed demand: Africa’s
most important trading partners,
including the EU, China, US
and
India,
are
undergoing
simultaneous crises and will
reduce imports from Africa.
for 7.4% of Africa’s GDP from
2016-18, is 58% lower today than
the WTI average price during that
period, putting pressure on foreign
exchange, government revenues
and domestic demand.
Disrupted supply chains: 51% of
Africa’s exports go to countries
highly impacted by Covid-19, while
53% of its imports originate from
such highly impacted countries.
Quarantines
and
movement
restrictions further frustrate supply
chains within these economies.
Fig 1. Projected impact of Covid-19
on Africa’s GDP growth, ECA
estimates.
According to the World Bank the
sub-Saharan Africa will experience
the first recession in 25 years as
a result of COVID-19. The first
recession in the region over the
past 25 years, according to the
latest Africa’s Pulse, the World
Bank’s
twice-yearly
economic
update for the region. The analysis
Falling prices: Prices have already
fallen precipitously for many of
the commodity exports on which
Africa remains dependent. The
price of crude oil, which accounted
Emergency
11 UN Trade Agency
Source: ECS Estimates.
12 United Nations Economic Commission For Africa: Trade
Related Effects Of Covid 19 On Africa march 2020
Impact of Covid-19 on Somaliland Economy
9
Bank of Somaliland
shows that COVID-19 will cost
the region between $37 billion
and $79 billion in output losses
for 2020 due to a combination of
effects. They include trade and
value chain disruption, which
impacts commodity exporters and
countries with strong value chain
participation; reduced foreign
financing flows from remittances,
tourism, foreign direct investment,
foreign aid, combined with capital
flight; and through direct impacts
on health systems, and disruptions
caused by containment measures
and the public response.13
4. ECONOMIC IMPACT ON
SOMALILAND
COVID-19 has a growing impact
on the economy of Somaliland.
Though, the current impact is
more on short-term, the medium
and long-term of the impact is
still unknown. These short-term
economic impacts can translate
into reductions in long-term
growth and difficult to recover.
4.1. Impact on International
Trade
The economy of Somaliland is
an open economy and it trades
with the rest of the world. The
following next sections deal with
the expected impact of COVID-19
on Somaliland’s trade with the rest
of the world. Due to the COVID-19
economic recession the world
trade growth volume will decrease
up to -11% in 202014.
4.1.1. Impact Somaliland
imports
Somaliland imports cover a wide
range of products consisting mainly
of food items, petroleum products,
building materials, machinery
and equipment, consumer goods,
pharmaceutical,
tobacco
and
motor vehicles, etc. Major trading
partners on imports are Ethiopia,
Kenya, Yemen, Saudi Arabia,
U.A.E, India, Thailand, Malaysia,
China, South Korea, Japan, Brazil,
Italy, France, Germany, Turkey
and UK. The main commodities
imported are sugar, cement, rice,
flour, fuel, building material and
general cargo items. In 2019
Somaliland imported goods worth
$573 millions15
Kat trade and consumption play
a significant role in the economy,
providing employment and one of
the pillars of the Ministry of finance
revenue sources. However, the
“Kat” is one of the first products
13 Source: World Bank Press Release April 9, 2020: COVID-19 (Coronavirus) Drives Sub-Saharan Africa Toward First
Recession in 25 Years
14 IMF: World Economic Outlook April,2020
15 Somaliland president’s annual constitutional address to the parliament feb 2020
10
Impact of Covid-19 on Somaliland Economy
Bank of Somaliland
which ontribute to the balance of
payment and trade deficit of the
country16.
Somaliland’s imports are expected
to decrease due to supply
chain disruptions and this will
have fiscal and unemployment
adverse implications, because
import duties contribute around
80% of the total revenue for
the government while only 20%
comes from Inland Revenue17.
The IMF predicts that the
imports volume of emerging and
developing countries will decrease
up to -8.2% which implies that
total Somaliland imports decline
to $526 Million if we take 2019
imports as a base year. This will
also cause a similar rate deficit on
fiscal capacity of the government
since customs duties are major
source of government revenue in
Somaliland
4.1.2. Impact on Somaliland
export
The Somaliland’s export to other
countries which is mainly livestock
and its byproducts are expected
to decline significantly due to the
disruptions of world supply chains
and quarantine measures spread
across the globe.
The total export value of 2019 was
$ 212 million, which is less than
the total import value of the same
year a deficit of $ 36118 million.
Using the current IMF prediction,
the volume of export of emerging
and developing countries is
predicted to decline -9.6% which
implies that the total export
value of Somaliland will decline to
$191.4 millions, when the base
year is 2019 total export value.
This will add up to the balance
of payment deficit. 70% percent
of the export value is expected
to be earned from the livestock
and livestock products export
reduction if the Hajj is banned this
year as it seems.
The following sections explain
the expected impact of financial
loss from the two main sources
of hard currency (remittance and
livestock) for Somaliland due to
the global disruptions caused by
Covid-19.
4.2. Impact on Remittance
Flow
4.2.1. Situational Analysis
Over the years, the Somali
culture of trust has created a
well-functioning money transfer
16 Source: Somaliland Ministry of Finance Development 2018
17 Ministry of finance development revenue statistics 2019
18 Source: The Somaliland president’s constitutional annual address to the parliament 2020
Impact of Covid-19 on Somaliland Economy
11
Bank of Somaliland
business which has allowed Somalis
in Diaspora to send money back
home. In the old days migrants
from Somaliland used to remit
money to their relatives either
via international bank transfers or
via couriers from other migrants,
usually, from the same clan or
locality. The former method was
expensive and took longer but
safer, while the latter was free of
charge and quicker but riskier. A
third method known as “Hawalah”
which involved remitting cash has
started during the oil boom of
the 1970s and 1980s when large
number of Somaliland migrant
workers in Saudi Arabia and the
Gulf countries needed to send
remittance to their families back
home. The traders and their agents
would collect money from those
migrants to deliver to their families.
One essential point to mention
is that, the Hawala companies
operate clearing system in Dubai
(United Arab Emirates), which
serves as the gateway for trade
finance transactions that support
the clearing and settlement of
remittance flows to Somaliland.
Remittances are a lifeline to Somalis,
especially here in Somaliland. The
volume of remittances received in
Somaliland in 2018 was USD 1.4
Billion which is equivalent to 51%
of Somaliland GDP. This makes
Somaliland one of the most
remittance-dependent economies
in the World. A survey19 undertaken
by World Bank indicates that
over 40 Percent of households in
Somaliland received remittances,
averaging USD 271 per month or
USD 3,252 per year. The same
survey reports that remittances
represent 80 percent of household
income. Remittances are falling
as a result of the of Covid-19
outbreak.
Countries,
where
remittances are sent, are on lock
down or under restrictions. Other
factors affecting this may include
migrants
having
insufficient
funds as a result of employment
loss; unavailability of services
to cash in or cash in the money
remittances cash based firms.
The fast majority of remittance
firms closed their business or
restricted the amount of remitting
money. Though, in some areas,
the mechanism of sending the
money has moved digitally, both
remittances in and out process is
still highly cash driven. Notably,
one local Hawala in Somaliland
requested to pay their remittance
through the mobile money in this
month April 2020. Some experts
also recommend making the
payments digitally to reduce to
the spread of the coronavirus in
19
12
Impact of Covid-19 on Somaliland Economy
Bank of Somaliland
the current situation.
In order to have a close look on
the situation, The Governor of
Central Bank of Somaliland Mr
Ali Ibrahim along with Director
General
and
Supervision
Department summoned Money
Transfer (Hawalah) officials to an
emergency meeting at the Bank
of Somaliland on 29th of March,
2020, in order to discuss about the
economic impacts of the COVID-19
crisis on Somaliland Remittances.
In short, the meeting outcomes
included:
◊ Remittances are a lifeline to
Somalilanders.
◊ Lock down measures taken
up by the majority of affected
countries (Sending Countries)
is causing an unprecedented
economic crisis to Somaliland
(Receiving country). Many of
these overseas workers are
involved in low-skilled labor,
employed
in
construction,
hospitality and as taxi/truck
drivers.
◊ Money transfer operators (MTO)
in Somaliland are looking for
alternative methods to clear
and settle the funds received
by MTO Agents, after the UAE
announced shutdown measures.
◊ The Central bank of Somaliland
will seriously examine ways
and
means
to
approach
relevant international financial
institutions and request them to
ease transfer restrictions
4.2.2. Transaction Analysis
As mentioned above, Remittance
flow from abroad to Somaliland, is
one of main lifelines of the economy.
In March 2020, remittance inflows
were $81 million, a decrease of
around 3% compared to Feb 2020
and a decrease of 13% compared
to Jan 2020. In the months
ahead, April, May and June, It is
expected to substantially decrease
or even more, given the fact
that the outbreak is bringing the
global economy down especially
in Western Countries and Gulf
States.
Source: Bank of Somaliland, 2020
Likewise, in first quarter of 2020,
a total remittance of inflows stood
at $226.72 million, a decrease of
1 percent compared to the first
quarter of 2019. In the first quarter
Impact of Covid-19 on Somaliland Economy
13
Bank of Somaliland
of 2019, the total remittance
inflow was $228.59 million dollars.
Furthermore, in the year of 2019
the total remittance inflows stood
at $1.3 Billion.
4.3. Impact on Financial Flow
from Livestock
Exporting livestock and livestock
products from Somaliland to Gulf
States is an important economic
activity and the main source of
foreign exchange into country. In
2017, the latest available data of
GDP by expenditure type, the total
export of goods and services were
$202 million of which livestock and
livestock products were 77% of
the total export value20. The level
of contribution of total export of
livestock and livestock products
to the national GDP has been
decreasing during the last decade.
In 2012, the earliest available
data of GDP, the total export of
livestock and livestock products
were 21% of GDP where in 2017
the total export value of livestock
and livestock products were only
6%20 of GDP. This was due to a
significant reduction of the number
of livestock export and livestock
products after a severe drought in
the years of 2016 and 2017.
the last decade.
Global countries are locking down
their
economies;
production,
trade, ports, etc. In a special
focus, Gulf States are the largest
consumers
of
Somaliland’s
livestock. Therefore, as a result
of the lock down, it may have a
direct negative impact for the
Somaliland livestock export in
the coming months of Hajj. Saudi
Arabia has already suspended
the smaller, year-round Umrah
pilgrimage until further notice
after the coronavirus pandemic.
The following figure 2 depicts the
trend of livestock and livestock in
Figure 2 : Livestock and Livestock
Products Percentage on GDP and Total
20 Source: Ministry of planning and national development, Exports
2018
14
Impact of Covid-19 on Somaliland Economy
Bank of Somaliland
Furthermore, though the plans are
still on hold, Saudi Arabia has asked
Muslims planning to take part in
the Hajj pilgrimage of this year
to postpone their bookings amid
uncertainty over the coronavirus.
Accordingly, if this uncertainty
over the coronavirus pandemic
continues, the Hajj pilgrimage
may be cancelled this year due
this coronavirus pandemic. Thus,
if Saudi Arabia suspends attending
Hajj this year, Somaliland will
lose its valuable income from the
exporting of livestock and livestock
products. This will have severe
direct economic impact on the
lives of livestock holders, supply
of capital flow to the financial
system, purchasing powers of
citizens, employment rate and
government’s revenue from this
export.
4.5. Impact on Employment
Rate
According to ILO (03/2020), the
crisis has already transformed
into an economic and labor
market shock, impacting not
only supply (production of goods
and services) but also demand
(consumption and investment).
Disruptions to production, initially
in Asia, have now spread to
supply chains across the world.
All businesses, regardless of size,
are facing serious challenges,
especially those in the aviation,
tourism and hospitality industries,
with a real threat of significant
declines in revenue, insolvencies
and job losses in specific sectors.
4.4. Impact on Exchange Rate
A disruptive short-term volatility
of exchange rate is expected in
Somaliland during the COVID-19
pandemic crisis due to a decline
of country reserves of foreign
exchange as the financial inflows
from the livestock export and
remittance funds from diaspora
are expected to decline.
Sustaining business operations
will be particularly difficult for
Small and Medium Enterprises
(SMEs).
Impact of Covid-19 on Somaliland Economy
15
Bank of Somaliland
Beyond the urgent concerns
about the health of workers and
their families, the virus and the
subsequent economic shocks will
impact the world of work across three
key dimensions: 1) The quantity
of jobs (both unemployment
and underemployment); 2) The
quality of work (e.g. wages and
access to social protection); and
3) Effects on specific groups who
are more vulnerable to adverse
labor market outcomes21.
The government of Somaliland
has imposed partial restrictions
and lock downs on vast majority of
businesses and economic activities
in the nation, pushing thousands
of people to lose their jobs and
increase the unemployment rate
for example the social distancing
and
movement
restriction
measures brought to close both
public
and
private
schools,
sports
and
entertainment
centers. Also, the Somaliland
government’s
restrictions
on
the number of passengers that
local transportation can carry
will decrease the income of the
transport sector and hence the
quality of the work in the sector.
In Somaliland, the latest data
available shows that more than 60
percent of urban areas undertake
business activities, where 28
percent work for salary or wage.
Other workers engage various
activities
including
domestic
work done, farming or herding,
volunteer etc.22
Hence, the lock downs and partial
restrictions imposed by the
government of Somaliland may
hurt workers, small and medium
business enterprises, and other
workers who get their salary or
wages from their daily activities.
4.6. Impact on Fiscal
Measures (Policy)
In the global context, the ongoing
COVID-19 outbreak has disrupted
economic activities across the
globe. Not only workers and
businesses affected, but also the
fiscal capacity of governments has
been affected by the COVID-19.
In the context of Somaliland,
import duties contribute around
80%23 of the total revenue for
the government where only 20%
comes from Inland Revenue.
If
the
uncertainty
of
the
pandemic continues, there will
be a significant reduction of trade
21 Source: international Labor Organization April, 2020
22 Labor Force Survey Somaliland 2012, Central Statistics Department.
23 Central Statistical Department- Ministry of Planning and National Development and Ministry of Finance Development
16
Impact of Covid-19 on Somaliland Economy
Bank of Somaliland
volume both imports and exports.
This will reduce the government
revenues from the trade activities
particularly imports, the greatest
source of revenue in Somaliland.
IMF predicts that the import
volume of developing countries
is expected to decline -8.2% in
2020, while the export volume of
the same countries is projected to
decline -9.6%.
5. CONCLUSION
COVID-19 Considering the grave
human, societal, and economic
consequences, there is a critical
need for health professionals
and policy makers to recognize
the magnitude of the Pandemic
and its subsequent potential
socio-economic impact during
the next three quarters of this
year; action must hence begin
here. The outbreak of COVID-19
in Somaliland has been relatively
limited so far, with only 5 confirmed
cases and no mortalities (as of
April 15th). The government of
Somaliland has imposed partial
restrictions on vast majority
of businesses and economic
activities in the nation as a result
of banning social gathering and
closing all schools, universities,
sports centers, kat tea shops
and public chewing places. This
restriction measures along with
those carried out by the other
trading partner countries will put
the economy of Somaliland under
burden and will lead to decrease
in economic growth, increase in
unemployment, and will lead to
monetary and fiscal tensions if the
Covid-19 Crisis Continue.
6. MONETARY &
FISCAL POLICY
RECOMMENDATIONS.
The government of Somaliland
has
implemented
certain
measures to contain the rapid
spread of the disease, including
full closure of borders, in-bound
traveler quarantine, passenger
limitations etc. The Central Bank
of Somaliland recommends the
following policy recommendations
to minimize the negative economic
and financial impact of COVID-19.
A. Monetary &
Measures.
Macro-Financial
1.The Central Bank of Somaliland
has to vigilantly observe,
monitor,
intervene
the
exchange rate stability of SLSH
Impact of Covid-19 on Somaliland Economy
17
Bank of Somaliland
versus US $ dollar and try to
maintain the rate at its current
levels i.e. Around SLSH 8,500
per $ dollar for the rest of the
year 2020.
2.The Central Bank of Somaliland
has to ensure that there is
adequate liquidity supply in
the financial system to support
the operations of financial
institutions and to finance
urgent cash needs of both the
Local & Central Governments
of Somaliland.
3.The Central Bank of Somaliland
has to issue directives to local
banks encouraging them to
ease credit access & lending
to Small & Medium sized
businesses and individuals
by relaxing stringent credit
conditions, policies, procedures
and processes.
4.The Central Bank of Somaliland
shall request from the lending
Banks to grant
existing
debtors a six-month deferral
of their repayment schedule
without penalty.
5.The Central Bank of Somaliland
shall take the necessary
public awareness measures
to encourage Citizens to use
18
of mobile money transactions
instead of cash transactions.
B. FISCAL MEASURES.
1.The Ministry of Finance may
provide
Credit
guarantees
to local Islamic Banks to
extend credit to Micro, Small
& Medium enterprises for the
production of basic food and
other essential supplies.
2.The concerned Gov’t Ministries
and Agencies have to introduce
Anti-price gouging policies,
including price controls for
food and medical supplies.
3.Ring-fencing
of
essential
supplies,
including
certain
restrictions on exporting basic
local agricultural products,
medical supplies and other
essential
items
to
cross
Somaliland borders.
4.Budget
Re-allocationto
increase expenditure on vital
sectors such as the health
Sector by improving virus
diagnostics,
rehabilitation
of clinics & hospitals and
purchase of essential medical
equipment.
5.Extend financial
support
to
Impact of Covid-19 on Somaliland Economy
and food
vulnerable
Bank of Somaliland
groups, poor urban families,
remittances
dependent
families, and wage earners
who were recently released
from the hard hit sectors such
as
tourism, hospitality and
transportation sector.
C. REMITTANCE MEASURES.
1.The
Central
Bank
OF
Somaliland will critically watch
and control the outward flow
of foreign currency funds from
Somaliland to abroad. A large
outflow of money, and lower
inflow of money may bring
severe liquidity risk to the
stability of the financial system
and hence the economy of the
nation.
2.Inward Remittances are a
major and vital lifeline to
Somaliland households. The
Central bank of Somaliland
will seriously examine ways
and
means
to
approach
relevant international financial
institutions and request them
to ease transfer restrictions.
3. The Central Bank of Somaliland
will encourage Money transfer
operators (MTO) in Somaliland
to look for alternative effective
methods and means to clear
and settle the funds received
by their MTO Agents.
Impact of Covid-19 on Somaliland Economy
19
Bank of Somaliland
20
Impact of Covid-19 on Somaliland Economy