Downward pressure on the som increased in mid-2010, owing to the instability in the country, but the NBKR intervened heavily throughout to support the currency. The NBKR will continue with its policy of intervention in the currency markets to attempt to smooth the pace of depreciation of the som, in an effort to prevent excessive import-driven inflation, while boosting export competitiveness. It will also occasionally make som purchases to limit the extent of money supply growth, as an anti-inflationary measure. We forecast that the currency will depreciate to Som47.8:US$1 by end-2011, a cumulative depreciation of around 9% compared with end-2009. Faster depreciation will be prevented by disbursements from the IMF and other donors, and by lower debt repayments as the external debt burden falls, owing to the renegotiation of Paris Club debt and the government's policy of tapping only concessional sources of credit. The pace of depreciation will slow in 2012, provided that political stability is maintained following the presidential election that is due at end-2011. We forecast an exchange rate of Som49:US$1 at end-2012.