Non-governmental organisations are warning of a financial crisis in Somalia after banks in the United States halted money transfers to the country ravaged by decades of instability.
The NGOs said Somalis living in the US are unable to send money home after the ban that is threatening to cut off the financial lifeline of locals.
The banks in the US have broken ties with money transfer operators in the country, a report released by the civil societies Thursday said.
According to the report, Somalia receives approximately $1.3 billion in remittances annually.
“Over 40 percent of people living in Somalia rely on remittances to meet their basic daily needs, nearly three million Somalis risk going hungry this year, families will not be able to afford health care, and a generation of children could be kept out of school,” Oxfam Somalia Country Director Enzo Vecchio said.
UK-based Barclays Bank was the first financial institution to close accounts held by Somali money transfer operators last year.
Two weeks ago, Merchant Bank in the United States, which was responsible for transferring an estimated 60 to 80 per cent of remittances to Somalia, followed suit.
Australia’s Westpac Bank has announced that it would soon close remittance accounts in the war-torn country.
Another Somalia-based NGO boss, Mr Degan Ali, said annual remittances to the country dwarf the yearly humanitarian aid, development aid and foreign direct investment budgets for Somalia combined.
The report by NGOs state that annual remittances represent 25 to 45 per cent of Somalia’s GDP.
“Somalia needs long-term support to build sustainable financial institutions as well as urgent help to maintain its current remittance flows,” states the joint report by Oxfam, Adeso and the Global Centre for Cooperative Security.