Somalia’s domestic revenue collections grew by 12 percent to $369 million in 2024, lifted by rental and sales taxes, as Mogadishu battles to revert to a healthy financial position following billions of dollars’ worth of debt write-offs by global lenders.“This increase was attributed to the improved collections from income taxes, sales taxes, and customs duties,” the country’s apex bank says.“This growth reflects ongoing efforts to diversify tax sources, including rental and sales tax and expanding the tax base in customs. The positive outcome reflects continued progress in tax compliance and the sustained implementation of revenue-enhancing measures.”During the period under review, tax revenue stood at $267 million, accounting for 29 percent of the total Federal Government of Somalia (FGS) revenue, exceeding the budget target by 11 percent and reflecting a 19 percent increase over the 2023 tax revenue outcome.

In addition, non-tax revenue stood at $102 million, representing 11 percent of total revenue, although slightly below the target by two percent.

Last year, Somalia secured irrevocable debt relief amounting to approximately $4.5 billion, equivalent to over 90 percent of its external debt stock after the country marked a historic turning point in its economic recovery journey by achieving the Completion Point under the Heavily Indebted Poor Countries (HIPC) Initiative.

This milestone, officially reached on December 13, 2023, was the conclusion of over a decade of persistent reforms and policy efforts across public financial management, macroeconomic stability, and governance.

Following the debt cancellation, the country’s external debt-to-gross domestic product (GDP) ratio fell dramatically from about 64 percent of GDP in 2018 to less than six percent by the end of 2023, significantly improving the fiscal outlook and unlocking space for critical development investments.

The debt relief under the HIPC framework involved a wide range of multilateral, bilateral, and commercial creditors.

Of critical importance was the agreement reached with the Paris Club of bilateral creditors, which wrote off nearly 99 percent of Somalia’s eligible bilateral debt, including the cancellation of more than $2 billion.

The United States government cancelled $1.14 billion in debt obligations last November, further consolidating Somalia’s path toward full reengagement with the international financial system.

At the end of 2024, Somalia’s total debt stock stood at $1.51 billion, with multilateral creditors making up 46 percent of this portfolio, amounting to $685.10 million.

The largest multilateral lenders include the Arab Monetary Fund, the Arab Fund for Economic and Social Development, and the International Monetary Fund.

The only remaining Paris Club creditors are Spain and Russia, whose claims consist of blocked funds and short-term obligations. A significant portion of Somalia’s outstanding debt remains in arrears, particularly to non-Paris Club and certain multilateral creditors, which together represent roughly 69 percent of the total debt stock.

CBS says the government remains committed to engaging these creditors to seek comparable debt treatment.

Despite external headwinds, Somalia recorded real GDP growth of 4.1 percent in 2024, supported by higher agricultural output, stable remittance flow, stronger livestock exports, and a rebound in private sector credit.

The banking sector continued to grow, with total assets reaching $2.02 billion, up 13 percent from 2023, signalling stronger balance sheets and improved financial intermediation.“Despite challenges and risks arising from climate change and rising global geopolitical conflicts and tensions, Somalia’s macroeconomic performance remained stable in 2024, and the domestic economy is projected to experience moderate growth,” says the CBS.

The current account deficit widened to 14 percent of GDP in 2024, up from 12 percent in 2023, mainly due to higher import demand despite strong growth in livestock and agricultural exports.

Household final consumption remained the largest driver of economic activity, accounting for 132 percent of the GDP.

Government final consumption, on the other hand, accounted for approximately eight percent of GDP in 2024, rising by 16 percent to $900 million from $775 million in 2023, with growth reflecting improved fiscal space, enhanced delivery of public services, and more effective budget execution.

© Copyright 2022 Nation Media Group. All Rights Reserved. Provided by SyndiGate Media Inc. (Syndigate.info).