Somaliland Approves Record $424 Million Budget in Test of Fiscal Momentum

Somaliland approves a record $424M budget for 2026, signaling fiscal recovery, expanded port revenues, and major tax reforms under President Irro’s administration

HARGEISA, Somaliland—Somaliland’s cabinet on Thursday approved the largest budget in the country’s 34-year history, endorsing a 4.58 trillion Somaliland Shilling ($424.5 million) spending plan for 2026 that senior officials say marks a decisive rebound after years of fiscal shortfalls—and an early test of President Abdirahman Mohamed Abdillahi “Irro’s” ability to translate campaign promises into broad economic reform.

The draft budget, which reflects a projected 22 percent rise in revenue over 2024, now moves to Somaliland’s House of Representatives for debate and final approval. If passed, it will take effect on January 1, 2026.

“This budget represents a turning point in our fiscal stability,” Finance Minister Abdillahi Hassan Adan told the cabinet during its 43rd weekly meeting, chaired by President Irro at the presidential palace. “We have not only covered previous shortfalls but projected substantial new revenue growth.”

Adan, who presented the spending plan alongside the Accountant General and senior finance officials, said Somaliland weathered average deficits of 11 percent between 2022 and 2024 but has “restored enough momentum to finance essential obligations, including salaries, arrears from 2024, and expanded national security requirements.”

A Historic Spending Plan Powered by Expanded Revenue

The 2026 blueprint allocates 63 percent of its total to central government operations, with the remainder divided among local governments, development programs funded by the World Bank and African Development Bank, and revenue-generating public agencies.

Somaliland 2026 Budget Breakdown

Ministry officials say the expanded fiscal space is built on multiple pillars:

• improved revenue performance at the Berbera Port—operated with DP World;
• stronger domestic tax collection, particularly from customs and VAT;
• the second phase rollout of a Goods and Services Tax (GST) on electricity, hospitality, and telecommunications;
• elimination of unauthorized tax exemptions;
• and the centralization of revenues historically controlled by disparate public agencies.

“Improved operations at Berbera Port, along with increased domestic revenue collection, have enabled the government to finance these key obligations,” Adan said. “This budget strengthens both fiscal stability and social investment.”

The port’s expanding role is central to the administration’s strategy. Monthly revenue data—officials declined to release exact figures—has reportedly surpassed 2023 levels and continues to climb, even amid sustained disruptions to Red Sea shipping routes caused by regional insecurity.

Political Transition Shapes Budget Priorities

The budget is the first full-year spending plan crafted under President Irro, who took office in December 2024 after defeating incumbent Muse Bihi Abdi in one of the most competitive elections since Somaliland restored independence in 1991. Irro, an experienced legislator and former parliamentary speaker, has emphasized technocratic governance and fiscal stabilization in his first year.

“The 2026 National Budget, which is the 35th and the largest in our history, prioritizes strengthening social services, enhancing national defense, improving internal security, expanding economic infrastructure, and protecting economic and fiscal stability,” Adan told the cabinet.

Of the 41 ministers present, 40 approved the plan, with one voting against it. Officials familiar with the cabinet discussions said the dissenting minister expressed concern over whether the tax reforms—in particular the GST expansion—can realistically be implemented within the proposed timeframe. But the overwhelming margin of approval indicates broad political consensus behind Irro’s fiscal direction.

The president, now midway through his second year in office, has also sought to rebuild trust among business groups frustrated by years of ad hoc exemptions and inconsistent tax enforcement. His administration’s insistence on “one treasury, one system”—centralizing funds previously collected independently by security agencies, municipal bodies, or state enterprises—has generated both praise from public finance experts and quiet resistance from institutions accustomed to financial autonomy.

Analysts: Revenue Growth Achievable—but Fragile

Regional economic observers describe the new budget as ambitious but grounded in more rigorous projections than those seen in recent years.

“This is the first budget in years that appears to be built on realistic revenue expectations,” said Mohamed Warsame, a Hargeisa-based public finance analyst. “But its success depends heavily on tax compliance and the ability of the government to finally centralize revenues that powerful agencies have long controlled.”

Warsame noted that while Somaliland has historically benefited from predictable customs income—nearly 70 percent of domestic revenue is linked to imports—its dependence on port activity leaves it exposed to global shipping patterns and regional turmoil.

Another analyst, Hodan Saed, said the government’s tax modernization efforts give the spending plan a credibility boost, but cautioned that external shocks could still undermine projections.

“Berbera is performing well, but it is not immune to regional security challenges,” she said. “Still, the government’s focus on digitizing customs, enforcing compliance, and eliminating informal exemptions gives this budget a stronger foundation than previous ones.”

Saed warned that “mid-year adjustments are nearly guaranteed” if shipping through the Bab el-Mandeb strait continues to slow due to regional insurgent activity or naval tensions.

A Bet on Port Growth—and on Governance

For President Irro, the 2026 budget is also a political document. Diplomats in the region say Somaliland’s fiscal trajectory is increasingly watched as a barometer of its campaign for international recognition and as a counterpoint to the political instability in neighboring Somalia, Ethiopia, and Djibouti.

“For a territory that is unrecognized but maintains elections, transfers of power, and functioning institutions, the credibility of the budget is central to its political narrative,” said a Western advisor monitoring public-finance systems across the Horn of Africa. “It’s not just about numbers; it’s about demonstrating that Somaliland behaves like a state.”

Irro’s allies say the reforms aim to improve service delivery and build investor confidence, particularly around the Berbera corridor—a trade route linking Ethiopia’s eastern regions to Somaliland’s deep-water port. The administration is also expanding auditing functions and deploying digital systems intended to reduce cash-based transactions, which have historically been vulnerable to leakage.

But governance reforms carry risks. Some state-owned agencies are expected to lose discretionary funds under the new centralization rules, potentially triggering bureaucratic pushback. In addition, the rollout of the GST’s second phase—particularly on electricity and telecom services—is expected to anger urban consumers, who already face some of the region’s highest utility prices.

The Budget’s Geopolitical Shadow

The cabinet’s approval comes amid unresolved tensions over Ethiopia’s January 2024 memorandum of understanding with Somaliland, which offered potential recognition in exchange for port and naval access—an agreement that Addis Ababa has yet to act upon following its 2025 elections.

Somaliland officials declined to address the MoU during Thursday’s meeting, but analysts say the budget’s strong focus on port infrastructure signals an expectation that the Berbera corridor will continue to expand as Ethiopia diversifies its access to seaports.

Somalia, which rejects Somaliland’s independence, has repeatedly criticized such moves, calling them a violation of its sovereignty. But Somaliland officials insist that the new budget positions the territory to capitalize on any eventual formal agreements—and withstand the diplomatic pressures that may accompany them.

Parliament Next: Scrutiny and Implementation Risks

The House of Representatives is expected to begin debate in the coming weeks. Lawmakers typically focus their scrutiny on allocations for security, local governments, and externally funded development projects, though no budget has been rejected in more than a decade.

If approved, the Irro administration will face the challenge of implementing its most ambitious fiscal plan to date.

“The budget is solid on paper,” said analyst Warsame, “but the real test will be whether the government can enforce tax reforms, resist political pressure on exemptions, and sustain port-driven revenue growth.”

Lawmakers are also likely to demand assurances that the government will publish quarterly performance reports—an accountability measure long proposed by civil society activists but never fully implemented.

A Moment of Confidence—Tempered by Caution

For now, administration officials are celebrating what they describe as a milestone in the country’s financial recovery.

“This is more than a budget—it is a signal of confidence in our economic direction,” Minister Adan told reporters after the session. “We are turning the page on deficit spending and building a new foundation for development.”

Whether that foundation can withstand the pressures of tax reform, regional insecurity, volatile port revenues, and entrenched institutional interests will determine how far Somaliland’s fiscal momentum carries it into 2026—and how convincingly it can present itself as a state in all but name.

—Reported from Hargeisa, with additional regional context.