Somalia’s next fiscal reforms could lift revenue, jobs and essential public services

Domestic revenue remains Somalia’s most pressing fiscal challenge, since current collections cannot cover core state functions and development needs.

Somalia's domestic revenue rose from 6.2 percent of GDP in 2024 to an estimated 6.3 percent in 2025, reflecting years of work to strengthen fiscal institutions and broaden the revenue base. Collections remain far below the 15–17 percent average among peer countries, leaving limited funding for development priorities and essential public services. The Somalia Public Finance Review (PFR), The Next Stage of Public Finance, sets out reforms that could help close this gap.

Over the past decade, Somalia has rebuilt core fiscal institutions, restored macroeconomic stability, strengthened public financial management and reached the Heavily Indebted Poor Countries Initiative Completion Point. High poverty, major infrastructure needs, rising security costs and declining external assistance continue to weigh on the country, with domestic revenue and spending on health and education among the lowest in the world.

The report calls for stronger domestic revenue and better coordination among levels of government to sustain growth, create jobs and reduce poverty as external assistance declines. Its simulations show the potential scale of change: higher growth and revenue, more teaching jobs and other productive employment, and lower poverty by 2033.

Stronger revenue to fund public priorities

Domestic revenue remains Somalia's most pressing fiscal challenge, since current collections cannot cover core state functions and development needs. The PFR points to opportunities to strengthen customs administration, modernize the legal framework, improve compliance, broaden the tax base and expand digital revenue systems.

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

Fiscal cooperation across government

The Federal Government collects about 71 percent of domestic revenue. Federal Member States and local administrations have a central role in delivering frontline services, making stronger intergovernmental fiscal arrangements and better coordination essential to fairer service delivery and stronger state capacity across the country.

The PFR identifies five priorities for a more sustainable fiscal system: strengthening domestic revenue mobilization, improving expenditure efficiency, managing fiscal and debt risks, enhancing public financial management and accountability, and advancing fiscal federalism to support more effective and equitable services.

Reforms could expand jobs and reduce poverty

The report's simulations estimate that the reforms could lift GDP by 9.3 percentage points compared with the baseline and increase domestic revenue by 6 percentage points of GDP. They could also support more than 54,500 new teaching jobs, improve employment opportunities for roughly 250,000 higher-productivity jobs and reduce poverty to 47 percent by 2033.

A stronger fiscal foundation could help Somalia sustain growth, expand essential services and create more opportunities for future generations.