Economic history of Somalia
The economy of Somalia italiana was initially based only on primitive agriculture, fishing, commerce and pastoralism of subsistence with great infusion of money from Italy since the end of the 19th century.
Although in the early 1930s Benito Mussolini drew up ambitious plans for economic development, actual investment was modest in comparison to what was done in Italian Eritrea.
Later, Italian companies paid wages to agricultural families to plant and harvest export crops, and permitted them to keep private gardens on some of the irrigated land.
[1] The colonial period also involved government employment of salaried officials and the concomitant growth of a small urban petty bourgeoisie.
Therefore, it was necessary to safeguard caravan routes and keep peace in port areas, requiring the development of police forces and other civil services.
In the south, however, Somalis sent children to colonial and mission schools, and the graduates found civil service positions in the police force and as customs agents, bookkeepers, medical personnel, and teachers.
[6] The conditional return of Italian administration to southern Somalia gave the new trust territory several unique advantages compared with other African colonies.
To the extent that Italy held the territory by UN mandate, the trusteeship provisions gave the Somalis the opportunity to gain experience in political education and self-government.
The state could rely on the customs taxes from international trade, which were easier to collect, but tariffs failed to meet the needs of a government with ambitious development goals.
[1] In the pastoral sector, the Livestock Development Agency, formed in 1965–66, emphasized veterinary services, the provision of water and of holding grounds for cattle while they were undergoing inoculation, and transportation.
Finally, and perhaps most important, many Somalis were enervated by the feeling that political incumbents, through electoral manipulations, were squandering the nation's economic resources for their private benefit.
On October 20, 1970, the first anniversary of the coup, he announced:[1] In our Revolution we believe that we have broken the chain of a consumer economy based on imports, and we are free to decide our destiny.
And in order to realize the interests of the Somali people, their achievement of a better life, the full development of their potentialities and the fulfillment of their aspirations, we solemnly declare Somalia to be a Socialist State.
Relying on Soviet advisers and a committed group of Italian-educated Somali "leftist" intellectuals, Siad Barre announced the 1971–73 Three-Year Plan.
Government officials argued that the scientific management of rangeland – the regeneration of grazing lands and the drilling of new water holes – would be possible only under socialist cooperation.
Building upon the bunding (creation of embankments to control the flow of water) done by the British in the 1950s and by the United States Agency for International Development (USAID) in the 1960s, the World Bank picked up the program in the 1970s and 1980s.
These projects called for rotating grazing areas, using reserves, and creating new boreholes, but the drought of 1974 and political events undid most efforts.
Essentially, they became havens for women and children because after the drought the men went off inland with whatever money they had accumulated to buy livestock to replenish their stock of animals.
In addition, the state put into operation a meat-processing plant in Chisimayu, as well as a fish-processing factory in Laas Qoray northeast of Erigavo.
By the end of the decade, Somalia's debt of 4 billion shillings equaled the earnings from seventy-five years' worth of banana exports (based on 1978 data).
[10] Somalfruit had an overall very positive effect on the banana sector, making big strides in marketing, shipping facilities, higher producer pricing, and increased input availability.
To meet IMF standards, the government terminated its policy of acting as the last-resort employer of all secondary school graduates and abolished its monopoly on grain marketing.
Because the International Development Association (IDA) considered this program too ambitious, the government scaled down its projects, most notably the construction of the Baardheere Dam, which AID had advised against.
In March 1984, the government signed a letter of intent accepting the terms of a new US$183 million IMF extended credit facility to run for three years.
In a Somali Council of Ministers meeting in April, however, this agreement was canceled by one vote, as the soldier-ministers chafed at the proposed 60 percent cut in the military budget.
A major obstacle to expanding livestock and other exports was Somalia's lack of communications infrastructure: good roads and shipping facilities as well as effective telecommunications and postal services.
[1] In March 1985, in negotiations with the Paris Club (the informal name for a consortium of eighteen Western creditor countries), Somalia's debt service schedule was restructured, and the government adopted a reform program that included a devaluation and the establishment of a free market for foreign exchange for most private transactions.
In November 1985, in conjunction with the Consultative Group of Aid Donors, a technical body of the Paris Club, the government presented its National Development Strategy and Programme with a revised three-year investment program.
In September 1986, a foreign exchange auction system was initiated, but its operation encountered severe difficulties because to its complete dependence on external aid.
In public finance, the government had reduced its deficit from 10 to 7 percent of GDP, as had been advised, but acknowledged that the increased taxes on fuel, rent, and sales had been only partially implemented.
