Somalia
Currency: Somali shilling (SOS); Somaliland, an independent region not recognized by any country, also issues its own currency called the Somaliland shilling
Inflation rate: Nobody knows. Whatever it is, it’s not low.
Exchange rate: 1,387.77 SOS per US$1
What went wrong? Everything. It’s no surprise that the U.S. dollar and not the shilling is the Somalis’ currency of choice for large transactions and foreign trade. When the Somali state collapsed in 1991, the Central Bank of Somalia collapsed with it, along with the entire banking system. The Somaliland and Puntland regions developed their own versions of central banks, and what remains in the rest of the country is an informal monetary system run by speculators in outdoor markets like Bakaara, Somalia’s largest. With no central regulating authority, traders make up the rules and prices as they go along, and counterfeiting is rampant. When the defunct Central Bank stopped printing notes, private businessmen and warlords merely imported new shillings printed in Canada or Southeast Asia as needed. The World Bank estimates that as much as 80 percent of the currency in circulation is forged, reprinted, or new currencies. The worst part? The 1,000 shilling note is the only note available in some parts of the country, even though a cup of tea costs 500 shillings.
Iraq
Currency: The new Iraqi dinar (NID)
Inflation rate: 40.92 percent in April 2007
Exchange rate: 1,260 NID per US$1
What went wrong? The war. In October 2003, the U.S. Coalition Provisional Authority introduced the New Iraqi Dinar to replace the old “Swiss” dinars that featured the likeness of ousted dictator Saddam Hussein. But the new design may have been the high point for the NID. Iraq’s inflation rate averaged 50 percent last year, as spiraling security costs and persistent shortages of gasoline fueled rampant inflation, while black market profiteers bid up the unofficial price of petrol. Struggling to keep inflation in check, Iraq’s beleaguered central bank allowed the dinar to appreciate by 14 percent and raised interest rates to 20 percent in December 2006. Inflation reached a peak of more than 66 percent in January 2007, but declined to a “mere” 40 percent in April. It’s an encouraging sign, but unless the country’s raging sectarian violence gets under control, not even Alan Greenspan will be able to turn Iraq’s economy around [Well, bah humbug on that point. There's even a whole website on the maestro's shenanigans.]
