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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.
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The review identifies existing mechanisms for cooperation, including the Finance Ministers Fiscal Forum and the Intergovernmental Fiscal Federalism Technical Committee. It recommends strengthening the arrangements that guide revenue sharing, expenditure responsibilities and coordination between federal and state authorities.
For local governments, however, the practical implications need closer attention. District administrations are often the level of government closest to residents, yet their ability to plan services depends on the resources available to them, the responsibilities assigned to them and the systems they have to manage public money.
Independent research published by the Institute of Public Finance Somalia in August 2026 examined public financial management in 15 districts across five Federal Member States. The study reported an average score of 3.47 out of 24 on its public financial management strength index, with no district scoring above eight.
The study points to challenges in local financial management and the relationship between assigned responsibilities and available resources. Its findings are separate from the World Bank review, but they add to the case for examining how public finance reforms reach the district level.
Improving local services will require more than increasing revenue. It will also require clearer responsibilities, predictable funding, stronger financial controls and better reporting on how public resources are used.
For citizens, transparency matters because it helps them understand which institution is responsible for a service, where its funding comes from and how they can seek answers when services fall short.
Somalia’s federal and state authorities therefore face a dual task: strengthening cooperation over how resources are shared, while ensuring that local administrations have the capacity and funding arrangements needed to fulfil their responsibilities.
The World Bank’s message is that stronger fiscal federalism can help mobilise revenue more effectively, distribute limited resources more predictably and connect financing more clearly to service-delivery responsibilities.
Whether those reforms improve everyday life will ultimately depend on implementation, and on whether citizens can see the difference in the services available to them.
For the parent seeking a school place, the patient needing treatment or the community waiting for essential infrastructure, the question is simple: who is responsible for funding the service, and how can citizens know that public money is reaching the people who need it?