EAST examines whether Somaliland’s expanding 2026 budget translates into stronger local government and inclusive development. The national budget reaches approximately USD 654.99 million, but local government allocations fall slightly while central government and donor-financed projects grow. The analysis highlights dependence on customs revenue, the concentration of spending in security and employee compensation, and the need for predictable, equitable fiscal transfers. It provides evidence-led recommendations for revenue modernization, municipal finance and accountable public investment.
Published by ISIR Institute and written by Ahmedi Yusuf, this analysis reviews Somaliland's 2025 national budget and asks one question: how decentralized is it? The budget totals USD 556.3 million (SLSH 3.89 trillion at 7,000 SLSH/USD), an 11.3% rise from USD 499.8 million in 2024 — growth driven mostly by donor-supported projects rather than domestic revenue.
KEY HIGHLIGHTS
• Central government still dominates: USD 368.0 million, about 66% of the national budget, up only 1.8% on 2024.
• Revenue rests on trade: 46% of central revenue (USD 170.6M) comes from international trade, and Berbera Port alone yields over USD 176M — 63% of all customs income.
• Customs is nearly flat: forecast customs income of USD 279.9M grows just 2.2%. Borama falls by USD 11.2M, while Zaylac (+USD 6.4M) and Caasha-cado (+USD 7.6M) rise sharply.
• Security comes first: USD 139.5M (+5.1%), roughly 38% of central spending — more than governance, education and health combined.
• Social sectors are squeezed: education (USD 25.5M) and health (USD 19.2M) both edge down, as do water (−5.7%) and environment (−3.8%).
• Infrastructure is the bright spot: economic infrastructure rises 36.9% to USD 18.3M, while governance is cut 15% to USD 69.6M.
• Donor money is concentrated: of USD 67.8M in donor-funded projects, 48% goes to one World Bank programme — the Somaliland Electricity Sector Recovery Project (USD 32.7M).
• Economy in context: real GDP reached about USD 2.5 billion in 2023, inflation rose to 9.73%, and remittances of over USD 1.2 billion a year remain households' lifeline.
WHAT ISIR RECOMMENDS
Move to performance-based and medium-term budgeting; correct arithmetic errors in the budget book; broaden domestic revenue beyond customs; give local governments greater fiscal autonomy and needs-based transfers for underfunded regions such as Sool, Sanaag and Togdheer; control wage-bill growth; invest more in infrastructure, health and education; reform procurement; coordinate donor funds transparently; and create an emergency fiscal reserve.
