Peace talks affect exchange rate

The inauguration of a new Somali parliament has had a favourable effect on the rate of the shilling in Mogadishu. On Sunday, when the newly elected Transitional National Assembly was sworn in, the dollar opened at 9,600 shillings and it closed at the end of the day at 8,200 shillings. By Tuesday, the shilling was exchanging at 9,000 to the dollar, Professor Mohamed Ali Abukar, a UNDP Mogadishu-based economist, told IRIN. According to Professor Abukar, the exchange rate in Mogadishu is determined mainly by supply and demand but has recently been affected by the progress of peace talks in Djibouti. “At times the market operates exactly like Wall Street and forecasts political events that may affect the market, like the Djibouti conference,” Professor Abukar said. Whenever there is some progress in the talks, the dollar loses ground, he said. “Due to the fluctuations of the money markets, business people wait for a few days to watch the trend of the exchange rate before the prices of goods are adjusted accordingly.” Other events that affect the Mogadishu exchange rate are large amounts of remittance money from the Somali diaspora, which tend to come into the market at the end of the month, he added.