Somalia Faces Economic Slowdown as Donor Funding Dries Up, Finance Minister Says.
Somalia’s economy is slowing sharply as international aid declines, Finance Minister Bihi Iman Egeh said this week, warning that reduced development support from global partners is weakening growth and straining the federal government’s limited domestic revenues.
In an interview with CNBC Arabia, Egeh said Somalia’s economy expanded by roughly 4 percent in 2024 but is now projected to grow just 1 percent in 2025 — a dramatic slowdown he linked directly to cuts in donor assistance.
“Somalia’s growth depends heavily on external financing,” Egeh said, adding that “the sharp reduction in global aid has limited the government’s ability to sustain development projects and social programs.”
For years, Somalia’s budget and infrastructure development have been overwhelmingly donor-funded. But with international partners scaling back their commitments and shifting resources toward other global crises, Mogadishu is struggling to fill the gap.
Egeh said the government is accelerating public financial management reforms, tax restructuring, and institutional modernization to expand domestic revenue. He highlighted the country’s progress in digitizing and automating tax collection, reforms that he said have boosted domestic income by more than 80 percent in the past three years.
Even so, the gains come from what he described as a “very low base.” The government’s expanded national budget — up 24 percent across 2024 and 2025 — remains underfunded, with domestic revenues insufficient to cover public spending.
International assistance, Egeh acknowledged, remains “essential” for rebuilding institutions and services weakened by decades of conflict.
The finance minister said the government is focusing new spending on education, health care, and social protection, noting that the share of domestic revenue devoted to education has grown from 3 percent to 10 percent in three years.
He also said Somalia has moved away from broad, non-targeted aid programs in favor of priority-based assistance that improves accountability and aligns with national development goals.
Despite these efforts, analysts say the country’s dependence on external funding underscores the fragility of its fiscal foundations — and the risks Mogadishu faces if foreign donors lose patience with a system still struggling to deliver measurable progress.
