Donor Funding Cuts Threaten to Halve Growth in 2025
WARYATV.COM | MOGADISHU— Somalia is on the brink of a sharp economic slowdown, with growth projections set to dramatically collapse due to a decline in international donor funding. The warning comes directly from Finance Minister Bihi Iman Egeh, who confirmed that the reduction in external aid is already straining the federal government’s ability to finance development and maintain services.
The Minister revealed that Somalia’s economy, which expanded by approximately 4 percent in 2024, is now projected to grow by just 1 percent in 2025. This dramatic forecast highlights the deep and persistent vulnerability of Mogadishu’s fiscal system, which remains overwhelmingly dependent on foreign support decades after the civil war.
The Problem: A Lifeline Running Dry
For years, Somalia’s budget—from infrastructure projects to social programs—has relied heavily on aid checks from global partners. The recent shift in international focus, diverting resources to other global crises, has exposed the fundamental fragility of the federal state.
In an interview, Minister Egeh admitted that Somalia’s growth is “heavily dependent on external financing” and that the “sharp reduction in global aid has limited the government’s ability to sustain development projects.”
While the federal government points to impressive efforts in boosting domestic revenue—claiming an 80 percent increase in tax collection over the last three years—these gains, as Egeh noted, come from a “very low base.” Despite accelerating reforms and modernizing tax collection, the national budget remains underfunded, with domestic income still insufficient to cover public spending.
Governance Failures vs. Fiscal Reality
The economic fragility provides a crucial context for recent governance failures. While Mogadishu attempts to project an image of modernization—most recently through the now-collapsed E-TAS e-visa system—the economic reality suggests a government struggling just to keep the lights on.
Analysts argue that the country’s profound dependence on external funding underscores the risk of relying on international patience. When donors see political chaos, instability, and incompetence, such as the massive e-visa data leak, it often accelerates the decision to scale back commitments, creating a vicious cycle where governance failures lead to fiscal disaster.
The Path Forward: Focusing on Essentials
The Finance Minister stressed that the government is trying to adapt by focusing new spending on critical areas like education, health care, and social protection. He noted that the share of domestic revenue dedicated to education has increased from 3 percent to 10 percent in three years.
However, the minister ultimately acknowledged that until institutions are fully rebuilt, international assistance remains “essential” for the country’s survival.
For regional observers, this economic warning reinforces the long-standing debate over self-sufficiency and governance model. While Mogadishu grapples with a steep decline in external confidence, the imperative for regional administrations like Somaliland to forge their own paths toward fiscal independence—free from the volatility of international aid cycles and the instability of the federal center—becomes even more urgent. The economic shock serves as a critical barometer of the true state of the federal project.
