Somalia relies on remittances, needs foreign investment

SOURCE: Reuters—“Goats and Remittances keep Somali Economy Afloat”

Reports this week observe that the remittances are the primary force maintaining the economy in Somalia, a country wracked by unrest and civil war since 1991. Remittances—funds sent into the country by expatriot Somalis to family and friends still residing in the nation—account for 70% of the country’s economy. The remaining 30% is accounted for in livestock and other exports such as charcoal and scrap metal.

Despite continuing political and civil unrest, reports indicate that exports and imports have remained stable and in some cases have even increased. While such increases are heartening for the situation in Somalia, the nation’s continued lack of centralized government may set up obstacles for foreign investment, which the World Bank claims Somalia sorely needs.

For discussion:

How can or should international or regional development banks—such as the World Bank and IMF—provide funding to countries that desperately need it but lack a stable government? Can it be done?

Can a country rely on remittances in the longterm? Do you think such an approach is a sound economic development strategy?