Determinants of Agricultural Exports in Somalia: The Role of Exchange Rates, Foreign Direct Investment, and Institutional Quality

Agricultural exports are critical to Somalia’s economy, providing employment, foreign exchange earnings, and economic stability. This study examines the key determinants of agricultural export performance in Somalia from 1985 to 2017, focusing on the impacts of exchange rate fluctuations, foreign direct investment (FDI), and institutional quality. Using an Autoregressive Distributed Lag (ARDL) model, the findings reveal that currency depreciation enhances export competitiveness in the long run, while exchange rate volatility negatively affects short-term exports. Institutional quality and FDI inflows significantly boost export performance, underscoring the importance of governance and external investments in strengthening Somalia’s agricultural trade. The study also highlights the role of rainfall in supporting agricultural exports, emphasizing the need for climate resilience strategies. Policymakers are urged to stabilize currency fluctuations, attract targeted FDI, enhance institutional governance, and invest in climate adaptation measures to maximize Somalia’s agricultural export potential.

Keywords: Agricultural exports, Exchange rates, Foreign direct investment, Institutional quality, Trade competitiveness, Climate resilience.