- Somalia has continued to advance important reforms and maintain economic stability, despite the significant global and domestic challenges. Growth is expected to remain positive at 2.3 percent in 2026, and gradually recover to 2.7 percent in 2027.
- Near-term policies should focus on preserving macroeconomic stability. Priorities include accelerating domestic revenue mobilization, maintaining spending discipline, enhancing public financial and debt management, and strengthening financial supervision and inclusion, while carefully advancing the currency reform with due diligence.
- Over the medium term, stronger governance, a better business environment, deeper access to finance, investment in human capital, trade diversification, and climate adaptation will be critical to foster more resilient and inclusive growth.
Washington, DC: An International Monetary Fund (IMF) staff team, led by Ms. Ran Bi, conducted discussions with the Somali authorities in Nairobi during September 21-October 1, 2026 on the 2026 Article IV consultation. At the conclusion of the discussions, Ms. Bi issued the following statement:
"Somalia is facing a confluence of significant global and domestic challenges, including sharp foreign aid cuts since 2025, severe and recurrent climate shocks, spillovers from the Middle East war and evolving electoral dynamics. These challenges have weighed on economic activity, raised inflation and food insecurity, pressured public finances, and dampened the near-term outlook. Real GDP growth is expected to moderate to 2.3 percent in 2026, before gradually recovering to 2.7 percent in 2027 and to 4 percent over the medium term. Inflation rose sharply amid prolonged drought conditions and global trade disruptions, and is projected to reach 6.5 percent in 2026. While resilient remittance inflows continue to provide an important source of household income and foreign exchange, the external position remains vulnerable. Near-term risks are high, including from more severe climate shocks, renewed regional conflict, further aid retrenchment, and domestic challenges. Sustained donor support is critical, especially if downside risks materialize.
"The authorities continue to focus on domestic revenue mobilization, although the current shock-prone environment has slowed progress. Sustained spending discipline has helped contain the fiscal deficit, while domestically financed social spending has been implemented in line with expectation. The IMF staff projects an overall fiscal deficit of 0.9 percent of GDP for 2026. For 2027, the authorities commit to further strengthening revenue collection and containing expenditure despite rising security spending needs. With conservative assumptions of budget support grants, the IMF team projects an overall deficit of 0.5 percent of GDP for 2027.
"Despite the significant challenges, it is important that fiscal reforms continue to advance. Key near-term revenue measures include enhancing customs and income tax enforcement, harmonizing sales tax across the federal government and member states, and raising non-tax revenues. The authorities are encouraged to accelerate revenue reforms to achieve the objective of fully covering operational expenditure by domestic revenues in the near term. Public financial management continues to be strengthened, with a comprehensive action plan for 2026-30 being finalized. The authorities should consider further prioritizing reform measures to align with implementation capacity. Near-term priorities include strengthening expenditure controls, managing fiscal risks associated with public-private partnership projects and implementing multi-annual commitment controls. Efforts to further improve debt management and transparency are underway. Preparation work to launch a competitive licensing round for the petroleum sector is also advancing.
"The Central Bank of Somalia (CBS) is making steady progress in strengthening financial supervision and inclusion. Continued efforts in safeguarding financial stability, enhancing payment-system oversight, and improving financial infrastructure to facilitate access to finance are important. Further progress in strengthening the framework for anti-money laundering and combating the financing of terrorism is critical to safeguard financial integrity and facilitate new correspondent banking relationships. The currency reform remains a national priority and should proceed carefully once key prerequisites are in place.
"Guided by the 2025-29 National Transformation Plan, the authorities are also committed to reforms to bolster more inclusive and resilient private sector-led growth. Recommended reform priorities include implementing high-impact governance reforms; improving the business environment and access to finance; strengthening trade integration and supporting greater domestic value addition and export diversification; and ensuring sound governance and operation of the Somali Development and Reconstruction Bank to facilitate financial access by underserved productive sectors. Sustained investment in education and climate resilience will also be critical, alongside continued improvements in the quality, coverage, and timeliness of economic and financial statistics.
"The IMF team expresses its appreciation to the Federal Government of Somalia, the Central Bank of Somalia, other government agencies, development partners, civil society and private-sector representatives for their cooperation and constructive discussions throughout the mission."
