Somalia’s Fiscal Mirage: Samaritan’s Dilemma, December Syndrome, and the Fragility of Surplus

Issue 7 (15/08/25)

In a nutshell:

Somalia’s fiscal story in 2024 is a paradox wrapped in promise. On the surface, the numbers shine: a consolidated surplus of $41.7 million; a third consecutive year of balance; federal revenues surging close to $1 billion. But beneath this veneer of stability lies a complex web of volatility, dependency, and structural fragility. Aid-driven revenue spikes, year-end spending surges, and subnational deficits paint a picture of a system that balances its books while straining its foundations. This isn’t just a tale of surplus – it’s a study in fiscal stress, where donor cycles, informal economies, and federal imbalances collide to challenge the very architecture of Somalia’s public finance. 

Read the complete Blog here:

https://open.substack.com/pub/abdilahi/p/somalias-fiscal-mirage-samaritans?r=60iv6n&utm_campaign=post&utm_medium=web&showWelcomeOnShare=false

Aid, Diaspora, and Debt: Unpacking Somalia’s External Sector Dynamics

Issue 5 (04/08/25)

In a nutshell:

Somalia’s balance of payments (BoP) over the past seven years tells a compelling story of a fragile, aid-dependent economy navigating persistent external pressures. The data reveals deep structural imbalances, a heavy reliance on remittances and grants, and limited progress in attracting investment or diversifying exports. While debt relief has improved fiscal space, the external sector remains vulnerable to shocks and institutional weaknesses.

Read the complete Blog here:

https://abdilahi.substack.com/p/aid-diaspora-and-debt-unpacking-somalias?r=60iv6n

Turning the Tide: Somalia’s Bold Path to Fiscal Resilience and Public Service Delivery

Issue 4 (24/07/25)

In a nutshell:

Somalia’s fiscal and service delivery challenges are no secret. If you’ve been following recent discussions or if you’ve been reading my Substack posts, you’ll know the situation has been tough. Really tough. But here’s the thing: the story has been improving too, and not just marginally. The real question now is how we can accelerate this progress and lock in the reform momentum. How do we build a system that’s not only fiscally resilient but also capable of delivering essential services across the country? 

Read the complete Blog here:

https://open.substack.com/pub/abdilahi/p/turning-the-tide-somalias-bold-path?r=60iv6n&utm_campaign=post&utm_medium=web&showWelcomeOnShare=false

Where Does All the Money Go? Somalia’s Recurrent Spending Dilemma

Issue 3 (17/07/25)

In a nutshell:

Last week on Substack, we unpacked Somalia’s federal fiscal journey from 2018 to 2024 – a story shaped by heavy donor reliance and a domestic revenue system that’s still finding its footing.

This week, we’re shifting gears to look at something just as critical: Somalia’s recurrent spending problem. But this isn’t just about numbers on a spreadsheet, it’s about what those numbers say about the state’s relationship with its people. When spending is unsustainable, it chips away at public trust, limits the government’s ability to deliver real change, and holds back progress on peace and development.

In this Blog, I break down the key challenges, draw lessons from other countries, and share some practical ideas for how Somalia can start turning things around.

Read the complete Blog here:

https://open.substack.com/pub/abdilahi/p/where-does-all-the-money-go-somalias?r=60iv6n&utm_campaign=post&utm_medium=web&showWelcomeOnShare=false

Strengthening Somalia’s Fiscal Foundations in the Absence of Fiscal Federalism

Issue 2 (10/07/25)

In a nutshell:

In FY2024, Somalia’s Ministry of Finance reported total revenues of $912.7 million, with 59.5% sourced from external grants and only 40.5% from domestic revenue. Tax revenues accounted for 29.2% of total revenue, while non-tax revenues contributed 11.2%.

This revenue structure reflects both progress and persistent structural challenges — particularly the absence of a formal fiscal federalism framework, which has significant implications for equity, efficiency, and sustainability.

Why this is disappointing

Somalia’s current revenue structure reveals a troubling overreliance on external aid, with grants comprising nearly 60% of total revenues in FY2024. While these funds offer short-term fiscal relief, they expose the country to volatility and undermine fiscal sovereignty — a classic symptom of aid dependency. According to the Musgrave framework, sustainable public finance requires a gradual shift toward domestic taxation. Yet Somalia’s low tax-to-GDP ratio signals untapped potential in broadening the tax base, improving compliance, and strengthening administrative capacity.

Read the complete Blog here:

https://abdilahi.substack.com/p/strengthening-somalias-fiscal-foundations

Aid volatility and budget resilience in fragile states

Issue 1 (03/07/25)

In a nutshell:

The overwhelming majority of fragile states remain heavily reliant on Official Development Assistance (ODA). But how resilient are their budgets to aid shocks, and do stronger institutions offer protection?

In this Blog, I show that stronger budget institutions do not necessarily buffer countries from aid volatility. In fact, countries with better governance may:

• Attract more diverse donors, leading to more variable flows.

• Be more transparent about volatility, making it more visible in data.

• Be more integrated into global aid systems, which are themselves volatile.

Meanwhile, low-transparency countries may appear more stable due to limited donor engagement or underreporting.

Read the complete Blog here:

https://abdilahi.substack.com/p/aid-volatility-and-budget-resilience