Somalia: The Gulf Link and Adjustment

Somalia’s economy is intimately tied to those of the oil-rich Arab countries, though the nature of the ties is only vaguely perceived. Starting from the late 1960s the country experienced a boom in livestock exports to Saudi Arabia and other Gulf states. The onset of the oil price hikes in 1973 and the consequent explosion in incomes in the Gulf intensified the boom, causing considerable commercialisation of the dominant Somali nomadic sector. By the late 1970s this boom had been overtaken by a much more powerful and enduring boom — the boom in labour exports to the same oil-rich Arab nations. In 1980 it was estimated that 150,000–175,000 Somalis worked in the Gulf countries, earning 5–6 times the average Somali wage, a great part of which was repatriated to the mother country. On conservative estimates repatriated money easily exceeded the local wage bill and equalled two-thirds of urban GDP. Repatriated money changed the whole character of the Somali economy, and the way it was repatriated required a change in our perception of its functioning, particularly its susceptibility to inflation and adjustment programmes. Unmindful of this the IMF set out to apply the standard adjustment package to Somalia — devaluation, wage and demand restraint, expenditure control and so on. In most African countries, it is now recognised, such programmes have failed to engender genuine ‘structural adjustment’ as their assumptions about the ‘typical’ African economy no longer apply after a decade of structural changes as a result of the on-going crisis.