MOGADISHU — Somalia’s four reporting Federal Member States raised a combined total of just US$15.51 million in revenue and grants during the first quarter of 2026, according to the Central Bank of Somalia’s Quarterly Economic Review.
The total stands in contrast to the US$153.9 million collected by the Federal Government over the same period, and underscores the profound fiscal imbalance between Mogadishu and the regional administrations that make up the federal system.
Revenue Breakdown by State
| State | Domestic Revenue | External Grants | Total Revenue | Total Expenditure | Deficit |
|---|---|---|---|---|---|
| Jubaland | US$9.17m | US$3.91m | US$13.08m | US$14.67m | US$1.59m |
| Galmudug | US$2.87m | US$2.72m | US$5.59m | US$9.21m | US$3.61m |
| Hirshabelle | US$1.73m | US$1.80m | US$3.53m | US$3.64m | US$0.11m |
| Southwest | US$1.25m | US$2.06m | US$3.31m | US$4.11m | US$0.80m |
| Total (4 states) | US$15.02m | US$10.49m | US$15.51m | US$31.63m | US$6.11m |
| Puntland | Not reported | Not reported | US$315.78m (2026 budget) | Not reported | Not reported |
Source: Central Bank of Somalia, Quarterly Economic Review 2026 Q1; Puntland Ministry of Finance 2026 budget. Puntland did not report Q1 2026 revenue and expenditure figures to the Central Bank.
Jubaland recorded the highest total among the reporting Federal Member States, collecting US$13.08 million in revenue and grants. Galmudug followed with US$5.59 million, while Hirshabelle recorded US$3.53 million and Southwest reported the lowest total at US$3.31 million.
Puntland’s Separate Fiscal Path
Puntland did not report its Q1 2026 revenue and expenditure figures to the Central Bank. However, its full-year 2026 budget provides a measure of its fiscal scale. The Puntland Parliament approved a budget of US$315.78 million for 2026, a 32.4 percent reduction from the 2025 budget of US$466.84 million, as reported in FTL Somalia’s coverage of the Puntland budget.
The reduction is driven primarily by a sharp decline in external support. Funding for international projects fell by 57 percent compared to 2025, reflecting broader aid reductions across Somalia. Despite the overall budget cut, Puntland’s Ministry of Finance projected a 16 percent increase in domestic revenue, attributing it to improved tax administration and local economic activity.
The budget figures have been a source of political tension. While official documents show a 32.4 percent decline, the Puntland presidency issued a statement claiming the budget represented a 16 percent increase, without clarifying which segment this referred to. Financial experts called for transparency, noting that the overall budget total had clearly decreased.
The Fiscal Federalism Gap
These figures reflect a deeper structural problem. Somalia’s Provisional Constitution provides for a fiscal federalism framework in which resources and responsibilities are shared between the federal government and the Federal Member States, but the necessary legislation has never been fully enacted. The Ministry of Finance acknowledged in its 2026 budget consultation report that “federalism is not working well in all states, and the fiscal federalism policy has not been fully agreed by all states.” The World Bank has similarly noted that the trust deficit between the federal government and the FMS over revenue sharing, resource management, and expenditure responsibilities remains significant.
Intergovernmental transfers currently lack a structured framework and formula, resulting in ad hoc and inequitable funding patterns. While the Baidoa Agreement provided some principles for revenue sharing, the core challenge remains ensuring these commitments are fully respected and consistently implemented across all parties.
Taxation Without Representation in Mogadishu
The fiscal imbalance between the federal government and the FMS has a direct impact on Mogadishu. Banadir Region currently has no exclusive power to levy its own taxes and no independent revenue source. It is administered directly by the federal government, and any decentralisation depends on future legislation by the federal parliament. Taxes paid by Mogadishu residents, including substantial revenue from the port, airport, and markets, flow directly into the federal treasury. Yet their representation in federal institutions remains contested. How Banadir should be represented in the federal structure, including whether it should have seats in the Upper House that represents the FMS, remains one of the most contentious unresolved issues in the constitutional review.
At the same time, the FMS do not contribute directly to the federal budget. According to the 2026 federal budget, approximately US$212.7 million is allocated as grants to the FMS. That money comes from revenue raised by the federal government, a significant share of which originates from taxes collected in Mogadishu and other federally administered areas. So while the FMS do not pay in to the federal budget, they receive transfers funded by taxes raised largely in the capital.
This arrangement has generated tension. Mogadishu residents bear a disproportionate tax burden while having limited to no representation in federal decision-making. The FMS receive federal transfers without a transparent or accountable mechanism linking their own revenue efforts to what they receive. Tax competition and double taxation impose additional burdens on taxpayers and weaken the social contract. The World Bank has stated that the fiscal federalism arrangement can only be finalised by adopting legally binding rules that delineate tax policy, tax administration, and revenue-sharing powers.
Expenditure and Deficits
All four reporting states ran financing deficits during the quarter. Galmudug reported the largest deficit at US$3.61 million, followed by Jubaland at US$1.59 million, Southwest at US$0.80 million, and Hirshabelle at US$0.11 million.
Across all four states, spending is overwhelmingly recurrent, consumed by salaries, operating costs and grants rather than investment in infrastructure or development. Capital expenditure across the four states totalled just US$2.03 million for the entire quarter.
Critical Note
The revenue figures for Somalia’s Federal Member States reveal a structural weakness at the heart of the federal project. The four reporting states collectively raised US$15.51 million in a quarter, less than one-sixth of what the Federal Government collected. Even more striking is the composition of their revenue: only US$15.02 million came from domestic sources, with the remainder provided by external grants.
The disparity is not merely a matter of capacity. It reflects an unresolved constitutional question about how revenue should be shared between Mogadishu and the regions. As long as the core legal framework for fiscal federalism, including revenue-sharing formulas, expenditure responsibilities, and transfer mechanisms, remains unestablished, tensions between the federal government and FMS, and between the central state and the capital’s residents, will persist.
Puntland’s situation illustrates the fragility of this arrangement. Its 2026 budget of US$315.78 million is by far the largest among the Federal Member States, yet it too is contracting, with international project funding falling by 57 percent. The budget dispute in Garowe, where the presidency and finance ministry issued conflicting figures, reflects the political sensitivity of fiscal transparency at a time of declining resources.
The expenditure patterns are also telling. Across all four reporting states, spending is overwhelmingly recurrent, meaning it is consumed by salaries, operating costs and grants rather than investment in infrastructure or development. Capital expenditure across the four states totalled just US$2.03 million for the entire quarter. This pattern reinforces a cycle in which states cannot invest in growth, cannot expand their revenue base, and therefore remain dependent on the centre and on external donors.
The revenue figures also carry implications for Somalia’s broader political stability. Federal Member States that cannot fund their own operations are vulnerable to political pressure from Mogadishu, and the unequal distribution of resources between the centre and the periphery is a recurring source of grievance. The tensions between Puntland and the Federal Government, and the recent disputes over elections in Hirshabelle and Galmudug, are in part manifestations of this fiscal imbalance. Until a functioning revenue-sharing framework is agreed and implemented, the federal compact will remain fragile and contested.
