Somalia Unveils $1.34 Billion Budget for FY2025, Announces First International Loan in Over Three Decades

 

The Somali administration has greenlit a federal budget of $1.34 billion for 2025. This represents a hefty 24.4% uptick from last year’s allocation of $1.079 billion. This financial boost stems from an uptick in local earnings and the need to tackle ongoing expenses, with homegrown revenue expected to hit $429.4 million, up 24% from $346.2 million in 2024.

Taking a gander at the 2025 budgets of East African Community (EAC) nations:

Kenya: $31.9 billion (up by 3.1% from 2024/25) Uganda: $19.61 billion (a whopping 36% increase) Tanzania: $18.85 billion (rising by 11.2%) Rwanda: $4.63 billion (up 11.2%) South Sudan: $1.4 billion Somalia: $1.34 billion (increasing by 24.4%)

Spotting the second-highest increase among the EAC countries, Somalia follows Uganda’s staggering 36% rise. This leap showcases the government’s resolve to improve operational spending, especially catering to the spike in security costs. The budget-to-GDP ratio surpasses 12%, hinting at the government’s growing economic role.

The Somali government is looking to bankroll the budget through $429.4 million in domestic moolah for 2025. Here’s the breakdown:

2025 Forecast (In Millions, USD)

Domestic Revenue

423.5*

Tax Revenue

295.3

Income Tax

38

Sales Tax

50.6

Customs

186.2

Other Taxes

20.4

Non-Tax Revenue

128.2

 

Source: MoF, Somalia

*Take note: While the council of ministries okayed $429.5 million in local revenue, official data is yet to be shared. The numbers come from the Somali Medium Term Revenue Roadmap 2024-2027.

The income tax hike is poised to climb nearly 38% from 2024’s budget. The government has proposed new tax legislation with significant impacts on corporations. A cut in corporate income tax (CIT) from 30% to 15% aims to enhance compliance among businesses who previously found the former rate financially daunting in a tough biz landscape. The personal income tax (PIT), too, is predicted to rake in more dough as its reach extends, now encompassing lower income earners earning from $100, down from $200.

The sales tax, expected to net about $50.6 million for FY2025, is aided by a flat 5% rate across the board, especially hitting those merchants using digital payments. Existing from the 1984 Sales Tax Law No. 2, it’s vital for the government to jazz it up by enacting fresh legislation via parliament.

Expectations are also set for borrowing $35.6 million from international monetary bodies. The Ministry of Finance needs to spill the beans on this borrowing, detailing repayment strategies and cash flow sources. With about $600 million in outstanding foreign debt, Somalia treads carefully to dodge a return to high debt stress after the post-HIPC (Heavily Indebted Poor Countries Initiative) phase.

Source: MoF, Somalia

No less than $870 million in international grants and aid is anticipated for 2025, compared to $694.6 million in 2024, underscoring Somalia’s shifting dependency on external assistance. Key spending targets salaries and purchasing goods and services.

In the blueprint for 2025, the Federal Government of Somalia commits $610 million to recurring expenses and $713 million to developmental ones, compared to $569 million and $509 million in 2024, respectively. That’s a bump of $41 million for recurring and $222 million for development, earmarked for administration, defense and security, economic services, and social amenities.

Edited by: Ali Musa

alimusa@axadletimes.com

Axadle international–Monitoring