World Bank Urges Somalia to Bolster Revenue Mobilization for Economic Stability

The World Bank has called on Somalia to intensify its efforts to boost domestic revenue mobilization to ensure sustained economic growth and resilience amid a challenging global economic landscape. This recommendation comes from the latest Somalia Economic Update for 2025, a comprehensive report released on June 30, 2025, in Nairobi, which highlights the critical need for fiscal reforms to support Somalia's long-term development goals. The report, titled "Boosting Domestic Revenue Mobilization to Enhance Service Delivery and Strengthen the Social Contract," underscores the importance of building a self-sufficient state capable of navigating economic uncertainties.

Somalia's economy has shown resilience in recent years, achieving a steady growth rate of 4.0 percent in 2024, driven by improvements in agriculture, increased private consumption supported by remittances, and declining commodity prices. However, the country faces significant challenges, including a projected decline in economic growth due to uncertainties surrounding foreign aid. Domestic revenue, which ranks as the second-largest source of resources for Somalia, remains critically low, covering primarily administrative costs, wages, and security expenses. This leaves essential public services such as healthcare, education, and infrastructure development underfunded, hindering the nation's ability to achieve sustainable progress.

The World Bank's report emphasizes that Somalia's formal revenue-to-GDP ratio stands at a mere 3 percent, one of the lowest globally, posing a significant barrier to effective service delivery and the strengthening of the social contract between the government and its citizens. Qimiao Fan, the World Bank Division Director for Kenya, Rwanda, Somalia, and Uganda, highlighted the urgency of addressing this issue, stating that the low revenue ratio is not just a technical challenge but a fundamental obstacle to Somalia's development. The report calls for sustained reforms to enhance revenue collection, promote fiscal sustainability, and foster a resilient private sector to drive inclusive growth.

Kristina Svensson, the World Bank Country Manager for Somalia, reaffirmed the organization's commitment to supporting Somalia's development journey. She stressed the importance of building robust economic institutions and improving the country's capacity to manage its complex socio-economic challenges. The Somalia Economic Update, presented at a launch event in Nairobi attended by key economists including Alma Nurshaikhova, Abdoulaye Onechaogo, and Stella Ilieva, provides a detailed analysis of Somalia's macroeconomic performance, poverty trends, and medium-term growth prospects. The report identifies risks such as declining foreign aid and proposes policy measures to mitigate these challenges through enhanced domestic revenue strategies.

Somalia's National Transformation Plan (NTP) for 2025-2029 and the ambitious Centennial Vision 2060, which aims to transform Somalia into a middle-income country by 2060, serve as guiding frameworks for these reforms. The World Bank advocates for policies that align with these plans, focusing on sustainable public finances and private sector development to create jobs and stimulate economic resilience. The report highlights the need for Somalia to diversify its economic base, reducing reliance on remittances, which accounted for 16.7 percent of GDP in 2022. While remittances have been a vital lifeline for millions of households, their dependence exposes the economy to external shocks, such as climate-related disasters and global economic fluctuations.

The Somalia Economic Update also draws attention to the country's broader development challenges, including weak institutions, ongoing insecurity, and inadequate infrastructure. These issues, compounded by high unemployment and widespread displacement, underscore the need for a unified national strategy to replace fragmented development efforts. The report cites successful examples from other nations, such as Rwanda's post-conflict transformation, which was driven by long-term strategic planning and inclusive leadership. By adopting similar approaches, Somalia can lay the foundation for a more resilient and self-sufficient state.

Recent initiatives, such as the Somalia-Kenya Trade Week held in February 2025 in Eastleigh, Nairobi, demonstrate the potential for regional cooperation to bolster Somalia's economy. The event, attended by Somalia's Minister of Planning, Investment, and Economic Development, Mohamud Abdirahman, and Kenya's Cabinet Secretary for Investment, Trade, and Industry, Lee Kinyanjui, aimed to enhance business cooperation and attract investment. Discussions highlighted Somalia's vast potential in sectors such as agriculture, fisheries, and maritime trade, given its extensive coastline and natural resources. Such initiatives align with the World Bank's call for economic diversification and private sector engagement to drive sustainable growth.

The World Bank's engagement with Somalia has been instrumental in supporting the country's reentry into the global financial system. In 2023, Somalia reached the Completion Point for the Heavily Indebted Poor Countries (HIPC) initiative, enabling it to clear arrears and access international financing after more than three decades. This milestone, supported by the World Bank and coordinated with the International Monetary Fund, has paved the way for increased investment in critical sectors. The World Bank's Country Partnership Framework for Somalia, spanning 2019 to 2023, and the new framework for 2024-2028, prioritize institution-building and citizen-centric service delivery to address the country's fragility and conflict challenges.

As Somalia navigates its path toward economic stability, the World Bank's recommendations underscore the importance of sustained reform efforts. By strengthening domestic revenue mobilization, Somalia can reduce its dependence on external aid, improve public service delivery, and build a more inclusive and resilient economy. The road ahead remains challenging, but with strategic planning and international support, Somalia has the potential to achieve its ambitious development goals and emerge as a model for post-conflict recovery in the region.