Uploaded on
Somalia is presented as what Category 3 looks like when it works. In December 2023 it reached the HIPC completion point after thirty years and received USD 4.5 bn of relief, which cut external debt to single digits as a share of GDP. It also has an IMF Extended Credit Facility augmented in December 2025, a dollarised economy with inflation of 3–4%, and a mobile-money system that reaches more Somalis than any bank. The budget is roughly balanced only because grants of about 10% of GDP cover what domestic revenue of 3–4% of GDP cannot.
The country stays in Category 3 because the state does not yet control its territory or tax its economy. Al-Shabaab regained ground in 2025, the AU mission is underfunded, Puntland and Jubaland contest the 2026 elections, and governance sits at the bottom of the world distribution. Grants, remittances worth a fifth of GDP and humanitarian funding all contracted in 2025–26, and growth is slowing to 2.8%. Socially, poverty is about 55%, youth NEET exceeds 60% and 6.5 million people are in IPC Phase 3 or worse.
The paper calls the road map the second half of the HIPC bargain: having cleared its debt, Somalia must build a state that can carry a modest amount of it, working through revenue, security financing and a currency in that order.
Key findings
- Domestic revenue would rise from 3–4% to 8% of GDP by 2030 through customs on a single valuation system at all ports, telecom and sales taxes, payroll income tax and a federal–state sharing formula.
- A negotiated federal compact with Puntland and Jubaland, and AUSSOM financing through UN assessed contributions, would replace security funding that currently has to be raised month by month.
- Debt sustainability is described as Somalia's only Category 1 asset, so the road map rules out non-concessional borrowing.
- The shilling would be reintroduced under a currency-board-style dollar anchor with a legal ban on monetary financing, the first sovereign currency in three decades.
- Mobile-money operators would be licensed as financial institutions to double private credit from about 5% of GDP, alongside livestock certification and port concessions.
- A national drought-response fund and grain reserve would aim to keep IPC Phase 3+ below 20% through a drought cycle.
Summary of the paper; the full analysis is in the PDF.