What’s Holding Back Somalia’s Development and How Do We Fix It?

Issue 10

Context

Since reaching the HIPC Completion Point in 2023, Somalia has entered a new chapter, one that demands disciplined action rather than aspirational promises. The early signs were encouraging: macroeconomic indicators showed progress, and donor engagement remained strong. But beneath the surface, new vulnerabilities have emerged across the economy, governance, climate, social protection, and security.

So, the question is: how do we keep the reform momentum alive and accelerate tangible progress for the Somali people?

Macro-fiscal landscape

Somalia’s economy is still growing – projected at 3.0% in 2025, though slightly down from 4.0% in 2024. Agriculture and remittances continue to be the backbone. But the deeper story is more complex. The trade deficit – now 8.7% of GDP – is widening. Structural reforms, which are essential for sustained and inclusive growth, remain weak and uneven, hindered by institutional weaknesses and ongoing political fragmentation.

Fiscal space is tightening. Grants are declining, and external debt, which had dropped dramatically after HIPC relief (from 64% to under 6% of GDP), is beginning to creep back up.

The path forward requires getting the politics right and building consensus around inclusive economic transformation. Diversifying the economy, expanding productive sectors, and strengthening domestic revenue mobilization are critical. A credible strategy to broaden the tax base, streamline customs administration, and prioritize high-impact public investments can reinforce macro-fiscal stability without undermining the delivery of essential services.

Reforms need to be accelerated

Somalia has made real progress on IMF benchmarks – at least on paper. But implementation is lagging. Revenue measures like SOMCAS and income tax reforms are delayed, and public financial management still faces execution gaps. Petroleum governance, too, needs clearer institutional ownership and sustained momentum.

This is a moment to double down on domestic capacity-building and subnational governance. Pair technical assistance with clear milestones, transparent monitoring, and real-time course corrections. That’s how reforms move from policy to impact. Yet, too often, opportunities are missed - undermined by short-termism and weak political ownership.

Public service delivery

Education and health services are heavily donor-funded – over 70% of their budgets. This reflects both international commitment and a fragile social contract. Meanwhile, the wage bill consumes a large share of public spending, crowding out capital investment and service expansion.

A smarter fiscal architecture is needed. Rationalizing the wage bill while investing in health, education, and infrastructure can yield higher social returns and build public trust. But it must be backed by stronger procurement systems, payroll controls, and performance-based budgeting.

Climate change and agricultural revival

Climate shocks are hitting hard, displacing over 5.6 million people and threatening food security. Yet they also present an opportunity: to invest in climate-resilient agriculture, water systems, and early warning infrastructure.

With cereal self-sufficiency at just 32%, Somalia must scale up irrigation, drought-resistant crops, and climate-smart technologies. These aren’t just about climate change – they’re engines of productivity, job creation, and food security. Unlocking climate finance is key to making this happen.

Governance and the social contract

Corruption remains a serious challenge – Somalia ranks near the bottom globally. The 4.5 clan-based power-sharing formula has entrenched patronage and weakened merit-based governance. But the window for reform is still open.

Inclusive federal dialogue, stronger anti-corruption institutions, and a rethinking of the power-sharing framework can enhance legitimacy and cohesion. Transparent budgeting, independent audits, and robust local governance are essential to rebuild trust and reduce displacement.

Social protection and human capital development

There’s real potential to expand social protection, especially shock-responsive safety nets, nutrition programs, school feeding, and maternal health. These are not just welfare measures; they’re investments in stability.

Boosting women’s labor force participation and creating youth employment pathways will strengthen households and communities. Prioritizing education quality, especially in rural and nomadic areas, and targeted support for girls and women will drive long-term gains in productivity and human capital.

Security and humanitarian coordination

Security remains fragile, but there’s a path forward. A national conflict prevention framework, stronger civilian protection, and formalized humanitarian coordination can improve aid effectiveness.

Better coordination with humanitarian partners will reduce bottlenecks, protect civilians, and align emergency response with development goals.

Final Reflections

Somalia stands at a pivotal moment. Advancing fiscal reform and expanding the tax base can unlock vital investments in health, education, and climate adaptation. Strengthening governance through constitutional dialogue and anti-corruption efforts will rebuild trust and reduce conflict.

Mainstreaming climate resilience, through finance, water security, and smart infrastructure, is non-negotiable. Human capital must be at the center: restoring school feeding, maternal health, and inclusive employment will empower communities and protect the vulnerable.

Public sector reform and improved service delivery will enhance efficiency and impact. And a national conflict prevention strategy, paired with stronger humanitarian coordination, will safeguard civilians and ensure timely response.

Finally, shifting donor engagement toward performance-based development financing will reinforce reform momentum and protect those most at risk.

Together, these priorities form a bold, integrated agenda for a more stable Somalia - one that can only succeed if political actors move beyond zero-sum games, patronage, and self-interest, and instead commit to collaboration, accountability, and a shared vision for national renewal. The never-ending cycle of misery must end; the Somali people deserve a future defined not by crisis and fragility, but by dignity and opportunity.