World Bank Urges Stronger Somali Revenues as Foreign Aid Declines

GOOBJOOG NEWS|MOGADISHU: Somalia needs to strengthen domestic revenue collection to finance essential public services as external assistance declines, the World Bank said on Monday.

Domestic revenues rose to an estimated 6.3% of gross domestic product in 2025, from 6.2% in 2024. However, collections remain well below the average of 15–17% of GDP in peer countries, according to a statement announcing the Bank’s Somalia Public Finance Review.

The report, titled The Next Stage of Public Finance, identifies domestic revenue mobilization as Somalia’s most pressing fiscal challenge, with current collections insufficient to finance core state functions and development needs.

“Somalia has made remarkable progress in rebuilding fiscal institutions and economic governance under exceptionally difficult circumstances,” said Hideki Matsunaga, World Bank Group Country Manager for Somalia.

“The next stage is to translate these gains into stronger domestic revenues, better value from public spending, and improved services for citizens, while preserving fiscal stability in a lower-aid environment.”

The financing challenge comes as Somalia faces high poverty, substantial infrastructure deficits and growing security spending pressures. Domestic revenues and spending on health and education remain among the lowest in the world, the Bank said.

Somalia has made progress over the past decade in rebuilding fiscal institutions, restoring macroeconomic stability and strengthening public financial management. It also reached the completion point under the Heavily Indebted Poor Countries Initiative.

However, declining external assistance has increased the importance of building a stronger domestic financing base.

“Despite recent improvements, domestic revenues remain too low to finance core state functions and development needs,” the statement said.

The Bank identified stronger customs administration, a modernized legal framework, improved compliance, a broader tax base and expanded digital revenue administration systems as opportunities to increase collections.

It also called for more efficient public spending, stronger accountability and better management of fiscal and debt risks.

Cooperation across government will be essential. The federal government collects approximately 71% of domestic revenues, while federal member states and local administrations play important roles in delivering frontline services.

The Bank said stronger intergovernmental fiscal arrangements and better coordination would be essential to improving equity, expanding service delivery and strengthening state capacity.