Publication: Somalia Economic Update: Boosting Domestic Revenue Mobilization - To Enhance Service Delivery and Strengthen the Social Contract
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2025-08-04
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2025-08-04
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Somalia continues to make important strides in advancing its economy and institutions. Following the completion of Heavily Indebted Poor Countries Initiative in 2023 and the accession to the East African Community (EAC) in 2024, Somalia has developed and started the implementation of an ambitious National Transformation Plan (NTP) 2024–2029. The NTP is designed to promote inclusive economic growth and the generation of jobs, strengthen institutions, and support resilience to climate shocks. The NTP is aligned with Somalia’s Centennial Vision 2060, which charts out institutional and socio-economic reforms that would help Somalia become a middle-income country by 2060. The national socio-economic transformation sought by Somalia’s NTP hinges on accelerating domestic revenue mobilization to advance state-building and provide more and better services to Somali citizens. Boosting domestic revenue is essential to improve the social contract between the government and Somali citizens across the country, invest in human capital development and infrastructure in support of long-term growth, and reduce reliance on foreign aid. Recent efforts show potential for increasing revenue, but sustained reforms in tax administration, customs, and fiscal federalism are needed. In this context, Somalia’s economic prospects are showing signs of improvement, despite the pace of growth remaining modest. Specifically, the economy is experiencing a rebound, inflationary pressures have diminished, and fiscal performance has shown progress. The outlook remains positive, with expectations for continuing economic growth, though at a moderate rate. However, despite Somalia’s strides towards recovery, there are significant risks to the outlook, including uncertain aid flows, climate vulnerabilities, and political and security threats. The 10th edition of the World Bank’s Somalia Economic Update (SEU) assesses key economic developments, prospects, and policies in Somalia. It looks at recent macroeconomic and poverty developments and assesses the risks and opportunities for the medium-term growth outlook. In its special topic, it focuses on policies for domestic revenue mobilization. The SEU is intended for a wide audience including policy makers, business leaders, the community of analysts and professionals engaged in economic debate, and the public. This SEU tackles the Domestic Revenues Mobilization challenges to Enhance Service Delivery and Strengthen the Social Contract. It emphasizes the importance of boosting domestic revenue collection for fostering sustained and long-term growth and proposes directions for reforms. Key policy recommendations include strengthening domestic revenue mobilization efforts to increase the revenue-to-GDP ratio by 2030 through expanding the tax base, modernizing collection of taxes and customs revenue, finalizing the fiscal federalism framework, and coordinating effectively Official Development Assistance (ODA). Additionally, enhancing public service delivery will play a critical role in reinforcing the social contract and supporting Somalia’s strategic vision for growth and stability.
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“World Bank. 2025. Somalia Economic Update: Boosting Domestic Revenue Mobilization - To Enhance Service Delivery and Strengthen the Social Contract. © World Bank. http://hdl.handle.net/10986/43540 License: CC BY-NC 3.0 IGO.”
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