Somalia, October 26, 2026 – For a resident waiting for treatment at a health facility, a parent seeking a school place or a community hoping for reliable water, public finance is not an abstract debate about government revenue. It is about whether the services people depend on are available, affordable and adequately funded.
That is the challenge at the heart of Somalia’s public finance reforms, as the government seeks to strengthen domestic revenue collection and clarify how resources are shared across different levels of government.
In the Somalia Public Finance Review 2026: The Next Stage of Public Finance, the World Bank identifies fiscal federalism- the distribution of financial responsibilities and resources across levels of government- as a key constraint on effective public spending and service delivery.
The report states that “FMSs and local governments bear increasing responsibility for frontline services and security, yet operate with limited fiscal resources.”
The finding raises an important question: how can local authorities be expected to deliver services when the resources available to them may not match their responsibilities?
Speaking during a World Bank briefing ahead of the report’s launch, Stella Ilieva, a World Bank Senior Economist involved in the review, highlighted the consequences of uneven resource allocation for ordinary citizens.
“Ultimately, this is about ensuring that a citizen’s access to essential services is not determined primarily by where that citizen lives,” Ilieva said.
Her observation points to the practical stakes of Somalia’s fiscal arrangements. Where governments have different revenue-raising capacities and responsibilities are not clearly matched to financing, the ability to plan and deliver services can vary across jurisdictions.
The World Bank report says expenditure responsibilities across levels of government remain only partially defined and are not consistently aligned with financing arrangements. It estimates that the Federal Government collects approximately 71% of domestic revenue, while Federal Member States have important frontline service-delivery responsibilities.
Somalia has made progress in rebuilding public financial management systems and negotiating agreements on fiscal and governance issues. However, the review argues that stronger cooperation is needed to make the allocation of resources more predictable and equitable.
This challenge is becoming more pressing as external assistance declines. The World Bank estimates that external grants could fall from around 5% of gross domestic product to below 1% by 2030. That transition will increase pressure on Somali institutions to mobilise domestic revenue and use available resources more efficiently.
The issue is not simply how much money the country collects. It is also how that money moves between levels of government, how spending responsibilities are assigned and whether the institutions expected to provide services have the resources and capacity to do so.