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Rampant Inflation Adds to Somalia's Woes

In Somalia, continuing insecurity, a surge in food and fuel prices, and uncontrolled printing of money have created runaway inflation that is threatening the lives of millions already suffering from 18 years of war and lawlessness. From the Somali capital Mogadishu, VOA Correspondent Alisha Ryu reports that with virtually no central authority to put the brakes on hyper-inflation, the country is on the brink of an economic catastrophe.

Shopkeeper Abdi Mohamed Islow looks down at the dozens of bags of Italian spaghetti he has had on display for days at his store in south Mogadishu.

He says up until a few months ago, the bags used to sell in a matter of hours. Now, spaghetti in this former Italian colony is a luxury few people can afford.

Islow says, "At the beginning of this month, one package of spaghetti cost 20,000 Somali shillings. It has now jumped to 32,000 shillings and the price is still going up."

For many people living in a country that is already at the bottom of economic growth indices worldwide, an annual inflation rate that has now reached triple digits is nothing short of a disaster. Staples such as sugar, flour, cooking oil, and rice are imported and priced in dollars.

Although the U.S. dollar has weakened in recent months against many other currencies, it has strengthened significantly against the Somali shilling.

A month ago, one dollar was worth about 22,000 Somali shillings. Now, the shilling is at an all-time low of about 26,000. Meanwhile, the price of a 50-kilogram bag of sugar, for example, has risen from $15 a year ago to nearly $30. That means Somalis are earning less every day while having to pay much more for goods.

In the capital, the economic crisis is severely testing the resourcefulness of hundreds of thousands of Somalis, who have managed to survive 17 years of incessant factional warfare and 15 months of violent anti-Ethiopian, anti-government insurgency that has killed 6,000 civilians and uprooted 700,000 others. But even the hardiest of residents say they are deeply worried that they may not be able to live through this crisis.

Fifty one-year-old Fatima Mohamed ran a small vegetable stand in Mogadishu's main Bakara market for 24 years until earlier this month, when everything she owned was stolen by government troops on a massive looting spree.

In Islow's store, she clutches a bundle of Somali shillings equivalent to about 50 cents, hoping to buy something that can keep her stomach filled for the day. After a few minutes, she leaves the shop empty-handed.

"Everything is so expensive," she says, adding that she had to beg all day just to earn 50 cents. She says she is starving and does not know how she will survive.

A surge in food and oil prices globally is one factor battering Somalia's fragile economy. Another factor affecting prices is the continuing insecurity in the country, which has forced 80 percent of Somali businessmen to leave. Their absence has reduced competition, allowing the remaining businessmen to raise their prices.

The spokesman for a regional business association, Abas Mohamed Duale, says at the same time, a massive, uncontrolled influx of newly-printed money from Somalia's semi-autonomous region of Puntland is causing the Somali currency to rapidly lose its value.

Duale declined to identify the people he believes are responsible for printing Somali shillings in Puntland. But he says huge amounts are being brought into the country by plane and being exchanged in the markets for dollars.

Since the collapse of Dictator Mohamed Siad Barre's government in 1991, there has been no legal printing of currency. Instead, currency notes have either been printed in the country by factional leaders or printed abroad and imported by individual businessmen.

Somalia's internationally-recognized interim government, which has been struggling to assert control since it came to power on the back of an Ethiopia-led military campaign against Somali Islamists in December, 2006, is in charge of a central bank that has little authority to officiate monetary policy.

Bank Director General Sharif Mohamed Hassan has vowed to clamp down on people printing and importing money and has promised to introduce new notes to end inflation.

But shopkeeper Islow repeats what many Somalis in the capital believe - that a top leader in the interim government may be the source of the problem. He holds up a 1,000 Somali shilling note printed in the late 1980s, and then another one that is brand new.

"This one, Mohamed Siad Barre. This one, Abdullahi Yusuf," Islow said.

Abdullahi Yusuf was Puntland's first president after the region was organized in 1998 and remained in power until he assumed the presidency of Somalia's transitional federal government in 2004.

Allegations that President Yusuf and some senior Puntland government officials were printing Somali money to raise hard currency surfaced in Puntland as early as last July, when the region's inflation rate began to spiral out of control. As in central and southern Somalia, food prices in Puntland have doubled, and in some cases tripled, in the past eight months.

Officials in Puntland and in the interim government blame local businessmen for sparking the currency crisis, printing more money than they were allowed and then flooding the markets with fake notes. The Puntland government says the printing of money by private individuals has been banned.

But the ban may be too late to prevent what international aid agencies say is a humanitarian catastrophe in the making.

In the first incident of its kind in Mogadishu in recent years, dozens of hungry residents last week attacked the driver of a commercial truck, carrying wheat flour to the market, and looted the contents. With a prolonged drought hitting large parts of the country, businessman Abas Mohamed Duale predicts the worst is yet to come.

He says civilians will begin dying of hunger because there is no solution to the problem. He says only God can help the Somali people now.