Somalia’s Customs Revenue Drops 40% as Hormuz Disruptions Drive Up Import Costs
MOGADISHU, Somalia — Disruptions in the Strait of Hormuz have cut Somalia’s customs-based domestic revenue by about 40%, adding pressure to an economy heavily dependent on imports from the Middle East, term-ended President Hassan Sheikh Mohamud told the United Nations General Assembly.
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Mohamud said Somalia’s reliance on goods shipped from the region had made the country especially exposed to instability along the strategic waterway, which carries a significant share of global energy and trade.
“The disruption has also resulted in approximately a 40% decline in our customs-based domestic revenue,” Hassan told the U.N. General Assembly on Thursday.
He described customs collections as a key source of financing for economic reforms, growth initiatives and poverty-reduction efforts. The president did not identify the period covered by the estimate or release figures comparing customs revenue before and after the decline.
According to Mohamud, the disruption has also raised the cost of food and fuel in Somalia, while contributing to higher inflation, transport expenses and insurance premiums for shipments bound for the country.
“Ensuring free and fair navigation through that waterway is critical to protecting vulnerable economies such as Somalia,” he said.
The estimate presented at the General Assembly builds on earlier Somali government assessments of the effects of the Hormuz disruption on the import-dependent economy.
In May, Somalia’s national statistics agency reported to the Cabinet that the volume of goods entering the country had dropped by nearly 40% during the disruptions. The government also said food prices had risen by 10% and health-care costs by 14%, while increases for some other goods were even steeper.
The Cabinet later instructed relevant government agencies to take steps to reduce the economic burden on the population.
Somalia obtains a large proportion of its food, fuel and other essentials from abroad, leaving households and businesses vulnerable to shipping delays, higher freight charges and disruptions to international supply chains.
The pressure has reached beyond household prices and into public finances. Customs duties collected at Somalia’s ports and other entry points form a significant part of federal domestic revenue, helping fund government operations and public services.
When imports decline, customs receipts can fall even as rising transport and insurance costs push up the prices consumers pay.
Hassan said his government remained focused on increasing domestic revenue despite the external pressures. He told the General Assembly that Somalia had strengthened public financial management and budget transparency, expanded its financial system and taken steps to improve the investment climate.
The president said Somalia’s economy was projected to achieve real growth of 3.1% this year despite substantial pressure from the global economy. He did not give further details on how the Strait of Hormuz disruption had been reflected in that forecast.
AXADLETM
