Economic Context

Traditionally livestock production and exports have been the basis of the economy, providing broad financial benefit to pastoral households as well as livelihoods at ports. Meat, together with milk, assures 75% of the calorie intake of the entire population. Compared to other nomadic livestock systems the one of Somaliland is very much market oriented.

Livestock exports including raw hides and skins (export of slaughtered animals was introduced only recently) represent about 50% of GDP and 80% of foreign currency earnings. The Saudi government ban on livestock imports has had a severe impact on economies and food security in Somaliland.

Reliance on livestock exports is matched by reliance on imported food and consumer goods which means that Somaliland is import-dependent as a result of both preference for imported food and marginal grain production despite rich agriculture land is available.

The Somaliland coast (85 Km.), holds rich marine resources. However, there are several key issues that are constraining the sustainable harvesting of marine resources:

  • The most serious problem is `poaching’ by foreign commercial fishing fleets.
  • Lack of infrastructure
  • People in Somaliland, traditionally do not consume marine food.

Frankincense and other natural gums and resins are a significant export crop in Somaliland. These are harvested from wild trees controlled by customary rights which have protected this resource from over exploitation. However the market for these products has fluctuated. Charcoal for domestic use has been increasing despite efforts by local authorities to curb the practice, which is posing a serious threat of deforestation in a fragile environment.

“Khat” trade and consumption play a significant role in the economy, providing employment and one of the pillars of the Ministry of finance revenue system.  However, the “kat” is acting as a drain on domestic income.

Remittance from abroad into Somaliland is another significant income which has been used to support families with funds.  This has a cushioning effect for many of the poorest households as well as fuelling certain economic sub-sectors such as trade and construction.

Taxation of imports/exports could be a primary source of potential revenue but is constrained by lack of regulation and effective promotion of trade.   All of the above mentioned economic context issues (opportunities and challenges) are fully considered when developing the current strategic plan.