Consumers blame traders for exploiting the current crisis, but retailers insist their own suppliers will no longer accept Somalia's older bills, some of which date back to before 1991.
"I can't accept the old money because I can't use it to buy products again from my wholesalers," said Obey Mahad, who runs a food shop in the capital.
Traders fault the government for failing to address the violence and lawlessness that have driven hundreds of importers to flee the country, and for doing nothing to stop the printing of fake currency. Critics say government officials may even be linked to the counterfeiting rings.
"The government is sitting around and not doing anything," said one aid worker who asked not to be identified because of safety concerns. "This crisis is weakening the government further and further every day."
The U.N.-recognized transitional government is barely holding on to power, supported by thousands of Ethiopian troops who in 2006 helped it topple an Islamist regime that controlled Mogadishu.
During a news conference Monday, Mogadishu Mayor Mohammed Dheere blamed the riots on traders and ordered them to accept all bills.
"They have almost all of the money in the country," Dheere said. "And they [feel they] can just refuse whenever they want and accept whenever they want."
The U.S. government, which supports the presence of Ethiopian troops in Somalia, views the ongoing instability as a threat to global anti-terrorism efforts.
Last week, the U.S. military killed a top Islamist leader with alleged links to Al Qaeda during an airstrike in central Somalia.
Even before the food and currency crises, aid groups had issued stark warnings about an impending humanitarian catastrophe in Somalia. About 2.6 million Somalis, more than one-fourth of the population, are in need of food aid, up 40% since January, according to the U.N. Food and Agriculture Organization. Rising prices are fueling a surge in unemployment among the urban poor, who previously found work selling firewood or doing laundry but now are unable to find even casual labor.
"I'm very worried because Somalia has so many people on the edge," said Peter Smerdon, spokesman for the World Food Program in Nairobi, which is feeding nearly 2 million Somalis.
"If rising food prices continue, Somalia is going to get hammered. If the government can't do anything, the question is, can aid agencies step up?"
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edmund.sanders@latimes.com
Special correspondent Mohammed reported from Mogadishu and Times staff writer Sanders from Nairobi, Kenya.
