When President Hassan Sheikh Mohamud came to office in 2022, his government articulated an ambitious reform programme: a new constitutional settlement to end nearly a decade of provisional governance, a transition to one-person-one-vote elections, a commitment toward fiscal self-sufficiency, and peaceful and productive relationships with Somalia’s neighbours.
It has not been a smooth four years. The constitutional process has been politically contentious. Parliamentary amendments passed in March 2026 extended presidential and parliamentary terms from four to five years. The Somali Future Council, an alliance of opposition leaders, has called for elections to proceed on the original timetable and has warned that it will initiate an alternative process if they do not. Federal forces currently control Baidoa following a breakdown in relations with South West State, the third federal member state to suspend cooperation with Mogadishu after Puntland and Jubaland. These developments have consumed political attention at a critical time, critical not just because of the continuing security situation, but also the precarious fiscal condition Somalia finds itself in.
Underneath the political uncertainty is a worrying structural challenge that relates to fiscal sustainability of the Somali state. Domestic revenue crossed $400 million in 2025, up from around $300 million in 2022. The implementation of a new income tax law, customs modernisation, and efforts to increase sales tax collections have contributed to this improvement. The tax-to-GDP ratio, however, remains around two to three percent, far too low when compared to what would be needed to cover the civil service payroll, security operations, and other running costs of the state. There is a deeper point here that fiscal numbers alone do not capture. In a state with limited enforcement capacity, tax compliance may be negotiated rather than being compelled. Citizens and firms who trust their government pay. Somalia’s revenue reforms will hit a ceiling if they do not pay attention to political legitimacy as a means to economic consolidation.
The fiscal situation came under immense strain when US programming in Somalia fell from around $770 million in 2024 to around $150 million for 2025. In a federal budget where nearly 70 percent of the projected inflows was expected from donor funding, this portends a massive fiscal crisis. Social spending continues to be financed almost entirely by foreign aid, which means the decline in aid affects service delivery in the areas of humanitarian assistance, and basic health and education. The US-Israel war with Iran this year has compounded Somalia’s problems since all of the country’s imports (food, fuel, and manufactured goods) have become more expensive while revenue from customs and import duties has fallen. Diaspora remittances, estimated at $1.8 billion annually, face similar headwinds as Gulf labour markets absorb the effects of the conflict.
The launch of Somalia’s first offshore drilling operation at Curad-1 is, in that context, a significant political statement as much as a commercial one. It signals to domestic and external audiences that the government is building toward a resource-rich, sovereign Somalia even as the immediate fiscal and humanitarian pressures mount. But the risk is that it provides cover for deferring the harder conversations about fiscal sustainability. Other fragile states that have allowed resource expectations to substitute for the harder work of fiscal consolidation have paid a serious price.
For western donors, this convergence of pressures raises questions that go beyond the current political and programming cycle – to support Somalia to get on a path of political stability and economic prosperity.
The first question is whether donors are prepared to speak clearly and in a reasonably unified voice about the relationship between the support they provide and the conditions the Somali government must meet to receive it. Coordination among donors has historically been patchy. The challenge is compounded by the fact that Gulf states and Turkey operate on entirely different terms in Somalia – they provide support without governance conditions, compete for commercial and strategic positioning, and have no interest in a unified donor position. Western donors cannot change that reality. What they can do is stop pretending it does not exist. A clearer and more consistent western voice, covering the electoral process, seeking transparency in resource agreements, and the accountability of security forces, would carry more weight than the same message delivered separately and at different volumes. Donors who feel they have lost leverage should consider what they still hold – western governments collectively shape the terms on which Somalia accesses global frameworks – of multilateral financing, climate finance, for instance.
The second question is whether donors are designing the right kind of programmes in Somalia. Much of the investment of the past decade has gone into making the Somali state look and function like a conventional government: institutions, payrolls, procedures, ministries. Some of that has produced genuine gains, and the revenue reforms are a real example. But Somalia’s citizens, the majority of whom have lived through three decades of ‘statebuilding’, have built lives and livelihoods largely outside formal government structures. The private sector delivers telecommunications, financial services, and much of the health and education provision. Designing programmes around what citizens actually need and can access, rather than around the institutional architecture that donors recognise from their own experience, would mean a significant shift in focus. This can mean a turn toward critical functions like public health, water and sanitation, and conflict prevention, delivered through community-embedded organisations with local legitimacy and reach.
The third question concerns the counter-terrorism effort. Donors have a legitimate interest in Somalia’s ability to contain al-Shabaab, and most understand that this requires more than airstrikes. It requires a political settlement that gives communities a reason to sustain that support. That means conditioning security sector support on transparency about how trained units are deployed. Community stabilisation work, including conflict resolution, local governance, and the grievance mechanisms deserves as much investment as military capacity building.
The immediate priority – a credible election that commands sufficient legitimacy to avoid a prolonged standoff – remains urgent, and a degree of political consensus is the least that is required. In 2021, a similar impasse produced street fighting in Mogadishu and a year-long delay. The counter-terrorism efforts faltered during that time. Today, the fiscal cushion is thinner and overlapping crises have resulted in acute humanitarian needs. The international community has a key role to play – pressing consistently for an inclusive political process, maintaining humanitarian programming through channels that reach people directly, and being honest with the Somali government about what continued support requires. Donors need to rethink their own roles here.
This is not an argument against state-building, but against the assumption that building state capacity and improving citizens’ lives are always the same project.
Suvojit Chattopadhyay
Head of Africa
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The views and opinions expressed in this article are those of the author and do not necessarily reflect the official policy or position of Adam Smith International.
