Somalia has requested an additional $40 million in financing from the International Monetary Fund (IMF) to help cushion the economy against the budgetary shortfalls caused by foreign aid cuts and to support the economic reform programme.

 

The proposed funding is part of Mogadishu’s new 36-month Extended Credit Facility (ECF) arrangement of SDR 75 million (about $100 million), which was approved by the IMF Board in December 2023.

The Somali authorities made the request during an IMF mission led by Ran Bi from September 16 – October 8, 2025, during which a staff-level agreement on the fourth review under the financing plan was reached.“To mitigate the negative impact of foreign aid cuts and support their reform efforts, the authorities have requested an augmentation of access under the ECF arrangement of SDR 30 million (about $40 million), to be disbursed in equal tranches at the conclusion of the fourth and the fifth ECF reviews, respectively,” Ms Bi said.

This agreement is subject to the approval of the IMF’s Executive Board.

According to the Fund, Somalia has maintained strong reform implementation and programme performance, and the economy is forecast to continue showing resilience, despite external headwinds.

The Completion Point is the stage in the HIPC Initiative where a country has demonstrated its commitment to a sustainable economic path and receives irrevocable and full debt relief.

Following a growth of 4.1 percent in 2024, Somalia’s economic prospects have weakened in 2025/26 fiscal year, amid significant foreign aid cuts and adverse weather shocks. Real GDP growth is projected at three percent and 3.3 percent in 2025 and 2026, respectively, while inflation is expected to remain stable at around 3.5 percent.

Downside risks continue to dominate the near-term outlook, including from protracted foreign aid disruptions and weather shocks, which could worsen the economic outlook.“An overall deficit of 0.3 percent of GDP is expected for 2025. The preliminary 2026 budget plan envisages continued progress in domestic revenue mobilisation and expenditure discipline while accommodating additional security and election-related spending,” the IMF said.

Somalia’s domestic revenue collections grew by 12 percent to $369 million in 2024, lifted by rental and sales taxes, as Mogadishu battled to revert to a healthy financial position following billions of dollars’ worth of debt write offs by the global lenders.

In 2024, Somalia secured irrevocable debt relief amounting to $4.5 billion, over 90 percent of its external debt stock, after marking a historic turning point in its economic recovery journey by achieving the Completion Point under the 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.

After the debt cancellation, the country’s external debt-to-GDP ratio fell drastically from 64 percent of GDP in 2018 to less than six percent by the end of 2023.

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