By Benadeta Mwaura - Reporter
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Somalia, October 26 ,2026 - For a Somali citizen, where you live could increasingly determine not only how much revenue your government collects, but also how much money is available to provide the services you depend on.
That is one of the central challenges emerging from the World Bank’s Somalia Public Finance Review, which warns that unclear responsibilities between the federal government and Federal Member States are contributing to differences in revenue collection, resource allocation and service delivery.
The report says Somalia’s domestic revenue reached only about 6.3% of GDP in 2025, leaving the country with limited resources to finance public services and development. At the same time, fiscal responsibilities across the different levels of government remain only partially defined.
During a pre-launch briefing with the World Bank team, Senior Economist Stella Ilieva explained that Somalia does not operate a single nationwide system in which revenue is collected centrally and then distributed according to an agreed formula.
Instead, different levels of government collect revenue under different arrangements.
“The federal government collects trade taxes, collects income taxes, sales taxes,” Ilieva said, explaining that different Federal Member States have also developed their own tax arrangements.
The result, she said, is a fragmented system in which taxpayers can face different rules depending on where they operate.
The World Bank team said trade taxes account for a large share of Somalia’s revenue, with significant differences in how those revenues are collected and retained across jurisdictions.
Ilieva pointed to the treatment of trade revenues collected through major ports as one of the challenges facing the federal system.
“Different federal member states collect different taxes, different arrangements, the base is different,” she said, adding that this makes it difficult for taxpayers to understand the tax legislation applicable to them.
The problem is not only about taxation.
It is also about what happens after the money has been collected.
The World Bank says expenditure responsibilities between the Federal Government and Federal Member States are not consistently aligned with financing arrangements, while differences in revenue capacity have created significant disparities between jurisdictions.
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During the briefing, the World Bank team gave a striking illustration of those differences.
Per-capita revenue in South-West State was estimated at about USD6.6 in 2025, compared with approximately USD40 in Puntland.
For citizens, such differences can translate into very different capacities for governments to finance schools, health facilities, roads, security and other essential services.
“That cooperation is becoming increasingly important as external grants decline and Somalia will need to rely on own revenues,” Ilieva said.
The World Bank argues that stronger fiscal federalism could help Somalia mobilise more revenue, distribute scarce public resources more predictably and connect financing more clearly to the responsibility for delivering services.
The ultimate test, however, is not simply how much revenue governments collect.
It is whether that revenue translates into better services for 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.
Somalia has already established mechanisms intended to improve cooperation, including the Finance Ministers’ Fiscal Forum and the Intergovernmental Fiscal Federalism Technical Committee.
But the World Bank says these mechanisms need to become more predictable and firmly institutionalised as the country prepares for a future in which external assistance is expected to decline.
The Public Finance Review proposes a gradual, nationally led approach rather than imposing a single model on Somalia. It calls for clearer revenue-sharing arrangements, better-defined responsibilities and rules-based transfers that can progressively be financed from domestic revenues.
For Somali taxpayers, that debate could ultimately determine a simple question: when money is collected in one part of the country, how much of it should remain there, how much should be shared, and who should be responsible for ensuring that citizens elsewhere are not left behind?
That is the fiscal federalism question Somalia now has to resolve as it moves into what the World Bank calls the “next stage” of public finance.