Livestock exports earned 80 percent of Somalia’s foreign exchange by 1982

Evidence

On the other hand, the livestock export industry, which had not been nationalised or controlled, flourished with rising world prices and steady demand. This trade peaked in 1982 at a value of US $132 million, representing 80 percent of Somalia’s total foreign exchange earnings. Under the so-called franco valuta arrangements, the government set a minimum price for such exports which each licensed exporter had to pay at the official rate through the national banking system. Typically, however, the price specified and reported to the Bank by the Somali exporter and Saudi, or other hard currency importer, was much less than that actually paid. This hard currency profit earned by the Somali exporter was either used to import scarce consumer goods for sale in Somalia or sold to Somali importers at the parallel market exchange rate which soared to over twenty times the official rate. — I.M. Lewis, I. M. Lewis, A Modern History of the Somali_ Nation…, 607

Categorization

• DEFINE: Explains the franco valuta mechanism of parallel-market currency profiteering.
• QUESTION: How typical was this two-tier currency racket across states facing IMF conditionality?
• XREF: connects to: Somalia became independent despite not being economically viable

Broader Connections

• Somalia became independent despite not being economically viable #corroborates (0.60)