The International Monetary Fund has approved an extra US$40 million in support for Somalia, praising the government’s commitment to reforms even as the Horn of Africa nation grapples with shrinking foreign aid, climate shocks and a fragile economic recovery.
The IMF Executive Board on Monday completed the fourth review of Somalia’s Extended Credit Facility (ECF) and agreed to increase the size of the programme by the equivalent of SDR 30 million, bringing total access to about US$140 million. The decision unlocks an immediate disbursement of US$30 million, raising total releases under the arrangement to roughly US$100 million since its approval in late 2023.
The ECF programme underpins Somalia’s post-debt relief reform agenda following its completion of the Heavily Indebted Poor Countries (HIPC) process in 2023, a landmark that wiped out most of its external arrears. The government is seeking to consolidate economic gains, rebuild key institutions and pursue long-term development under its National Transformation Plan and Centennial Vision 2060.
Despite what the Fund described as “persistent global headwinds,” including steep cuts to foreign assistance, Somalia has broadly met programme targets. IMF Deputy Managing Director Nigel Clarke said in a statement that Mogadishu had shown “steadfast reform implementation” at a time of heightened uncertainty.
“Persistent and sizeable foreign aid cuts, recurrent climate shocks and elevated uncertainty continue to weigh on the growth outlook and public finances, with significant social repercussions,” Clarke said. “These pressures underscore the need to sustain sound policies and the reform momentum, and accelerate domestic revenue mobilization to create room for priority spending.”
For the first time, Somalia plans to increase social spending in 2026 using domestic revenues rather than relying on external assistance — a shift the IMF called an important step toward fiscal resilience. Donor support, however, remains crucial to maintaining economic stability and financing reforms, Clarke added.
The Fund said fiscal performance this year has been stronger than expected, helped by rising domestic revenue, tight spending discipline and steady progress on structural reforms. The 2026 budget approved by the Cabinet echoes IMF recommendations, targeting further revenue gains, cautious expenditure management and protection of essential social programmes.
Key measures include modernising customs systems, implementing the new income tax law and strengthening revenue administration across federal and state levels. The IMF also urged Somalia to maintain momentum in public financial management and debt oversight as it prepares cautiously to access concessional external borrowing for the first time since debt relief.
The rollout of civil service reforms, including a new Pay and Grade system and a national pension scheme, should be aligned with fiscal sustainability, the Fund said.
Somalia’s current economic conditions
Somalia’s central bank has also recorded progress, particularly in building regulatory capacity and updating oversight of banks and mobile money operators. The IMF welcomed ongoing work to deepen financial inclusion and upgrade anti-money laundering and counter-terrorist financing controls.
One of the most sensitive undertakings is the planned reintroduction of the Somali shilling. The currency — badly eroded by decades of conflict, counterfeiting and dollarization — is being prepared for a managed re-launch under a proposed currency board arrangement designed to anchor monetary stability. Clarke said preparations were advancing and should continue.
The Fund also said Somalia must reinforce transparency and governance in the nascent petroleum sector as interest in offshore oil blocks grows. Mogadishu recently completed a new legal framework intended to regulate contracts and safeguard public revenues. Clarke urged authorities to fully adhere to the rules while pursuing broader reforms to combat corruption and bolster climate resilience.
Somalia, long seen as one of the world’s most fragile states, has weathered repeated droughts, floods and conflict, all of which have strained government capacity and widened humanitarian needs. With traditional donors scaling back aid, domestic economic reforms are becoming increasingly central to sustaining stability.
The IMF said continued political commitment and support from international partners would be vital as Somalia enters the next phase of its post-HIPC transition.
