- Basic data
- Public finances and the state budget
- Banking system
- Tax System
According to cheeroutdoor.com, the availability of reliable data on the Somali economy is unfortunately minimal. Somalia’s economy is estimated to have shrunk by as much as 7% in 2020, not only due to the global pandemic, but also due to political instability and natural disasters that significantly affected the agricultural harvest. In 2021, the Somali economy is estimated to have grown by up to 3.9% thanks to a low base from the previous year, however, other sources point to a continued decline in GDP in 2021. Due to the worsening economic situation and increasing instability, it is possible to expect more intense activities of the al – Shabaab. In the coming period, Somalia will benefit from the growing political rivalry between the Gulf states, which should ensure an influx of foreign investment. Together with the continued development of telecommunications and financial services, Somalia could thus record moderate economic growth in 2022 and 2023. The main economic engine of Somaliland is the construction of the port in Berbera, which is financed by the Emirati company DP World. In the future, Berbera should compete with the port of Djibouti and compete with it for the main artery for Ethiopian exports and imports.
According to the latest available data on the structure of the Somali economy from 2014, agriculture accounts for 60.2% of GDP, industry for 7.4% and services for 32.5%. Since then, it can be estimated that the share of services has increased, but agriculture remains essential to the economy.
|GDP growth (%)||2.9||-7||3.9||2.8||ON|
|Export of goods (billion USD)||0.6||ON||ON||ON||ON|
|Import of goods (billion USD)||3.1||ON||ON||ON||ON|
|Trade Balance (Billion USD)||ON||ON||ON||ON||ON|
|Industrial production (% change)||ON||ON||ON||ON||ON|
|OECD export risk||7/7||7/7||07.VII||ON||ON|
Source: EIU, OECD, IMD
Public finance and state budget
|State budget balance (% of GDP)||ON|
|Public debt (% of GDP)||ON|
|Current account balance (billion USD)||ON|
|F.O||0-18% depending on the amount of income|
Somalia’s public finances have been undergoing a period of consolidation in recent years. External debt is gradually falling from its peak of $billion and is expected to reach $557 million in March 2023. Somalia is a member of the extended credit facility and extended fund facility under the IMF. The state budget for 2021 envisaged revenues of USD 648 million (including USD 388 million from donors) and expenditures of USD 671 million. For 2022, expenditures are planned to be USD 699 million and revenues USD 717 million (including USD 470 million from donors). However, the outgoing parliament did not approve this budget and it cannot be expected that domestic revenues would really reach the planned level. Somalia remains dependent on international aid, which goes into development programs and the health sector. However, much of this money bypasses bureaucratic institutions.
In the case of Somaliland, government spending is mainly directed towards security, infrastructure building and healthcare. Revenues from customs duties in the port of Berbera represent a key source of the state budget. Expansion of the port in the next period will increase revenue from customs and taxes. Direct budget aid is minimal due to Somaliland’s international status, however, the influx of foreign direct investment into the port of Berbera will increase the revenue potential for the state budget.
The Central Bank of Somalia is struggling with a lack of resources and political pressures. Its efforts to suppress money laundering and terrorist financing as well as capacity building are positively evaluated by the IMF. Puntland and Somaliland have their own central banks, whose role (responsibilities and territorial jurisdiction) will need to be clearly defined in the future, as the Central Bank of Somalia seeks to regain monetary control over the entire territory. In August 2021, the Central Bank of Somalia announced the introduction of a new national payment system that should link authorized financial institutions and enable real-time money transfers. This move should facilitate financial and business interactions in more stable parts of the country and increase client confidence in the banking system.
Several private banks operate in the capital, but their scope does not extend beyond its scope. A banking service and remittance system called Dahabshiil is successfully operating throughout Somalia.
Given that Somalia is dominated by the informal economy, the problem of the tax system is its low efficiency and arbitrariness in application and enforcement.
There is a 0% rate for individuals with a monthly income of up to $200, then there are rates of 6% and 12%, and for the highest category that earns more than $2501/month, the rate is 18%.
Sales tax is 10%. Corporate tax is set at 35%.
The tax system is ranked 190th out of 190 on “Doing Business” (for comparison, the Czech Republic is ranked 53rd).