The Ministry of Finance of the Federal Government of Somalia, together with the Ministries of Finance of the Federal Member States and the Administration of the Banadir Region, convened a two-day meeting on 15-16 February 2026 dedicated to strengthening fiscal governance frameworks and reinforcing cooperation between the federal and state levels of government.
The Meeting was held in Mogadishu and attended by senior finance authorities, the deliberations focused on enhancing intergovernmental fiscal coordination, reviewing and refining transfer mechanisms, advancing revenue assignment reforms, and modernizing public financial management systems. The resolutions adopted reflect a deliberate and structured shift toward greater fiscal harmonization, clearer institutional mandates, and a more integrated system of governance within Somalia’s federal framework.
Major discussions include
- Amendment of the February 2023 Fiscal Transfer Grant Agreement
The meeting considered proposed revisions to the Fiscal Transfer Agreement originally concluded in February 2023, aiming to refine and improve its implementation based on experience over the past three years. Participants assessed how the transfer framework had functioned in practice, recognizing that administrations had accumulated valuable operational experience.
The discussions also highlighted areas requiring modification to improve coordination, increase efficiency and transparency, and strengthen fiscal governance nationwide. The 2026 revision of Somalia’s fiscal transfer formula represents a clear restructuring of how intergovernmental funds are allocated.
- First, the Equal Share component was reduced from 57% in 2023 to 25% in 2026, meaning that a smaller portion of the total transfer pool is now distributed equally among the Federal Member States.
- Second, a new category titled Promoting Fiscal Federalism was introduced with a 20% allocation, signaling an intention to support institutional development and stronger coordination within the federal system.
- Third, the Revenue Enhancement component increased from 15% to 20%, encouraging states to improve domestic revenue mobilization efforts.
- Fourth, the allocation for Expenditure Management rose slightly from 15% to 17%, reflecting greater emphasis on responsible budgeting and spending practices.
- Finally, the share dedicated to Reporting and Auditing expanded from 10% to 15%, demonstrating a stronger focus on transparency, accountability, and financial oversight.
Comparative Table: 2023 vs 2026 Fiscal Transfer Formula
| Parameter (Component) | 2023 (%) | 2026 (%) |
| Equal Share | 57 | 25 |
| Promoting Fiscal Federalism | 0 | 20 |
| Fiscal Gap Equalization | 3 | 3 |
| Revenue Enhancement | 15 | 20 |
| Expenditure Management | 15 | 17 |
| Reporting and Auditing | 10 | 15 |
2. Approval of the Revenue Assignment Agreement
The formal endorsement of the Revenue Assignment Agreement under the National Consultative Council (NCC) framework represents a foundational step in clarifying taxation powers between levels of government. Clear revenue assignments reduce duplication, prevent tax competition, and enhance predictability for businesses and citizens.
3. Modernization of Public Sector Payroll Systems
Another important reform discussed in 2026 was the modernization of civil servants’ salary payment systems in the Federal Member States. Payroll reform is a core element of Public Financial Management (PFM) reform, as it enhances transparency, reduces ghost workers, and improves budget credibility. The integration of payroll systems with federal reform programs and development partner support reflects a broader strategy of aligning subnational financial management practices with national standards. This contributes to improved fiscal discipline and administrative efficiency.
4. Advancing Public Financial Management (PFM) and Domestic Revenue Mobilization
The meeting emphasized strengthening domestic revenue mobilization and harmonizing fiscal policies nationwide. Expanding internal revenue sources is critical for Somalia’s long-term fiscal sustainability, particularly as external budget support gradually declines. Improved PFM systems including budgeting, reporting, audit, and fiscal coordination form the backbone of accountable governance. The 2026 outcomes demonstrate a renewed commitment to building a coherent national fiscal architecture capable of supporting economic recovery and institutional consolidation.
The 2026 Finance Ministers’ Meeting represents a significant milestone in Somalia’s evolving fiscal federalism framework. By revising intergovernmental transfers, approving a revenue assignment agreement, modernizing payroll systems, and reinforcing fiscal coordination mechanisms, Somalia is moving toward a more structured and cooperative model of fiscal governance.
The meeting did not include participation from the Ministries of Finance of certain Federal Member States, notably Puntland and Juba land, amid ongoing political tensions between the Federal Government and those administrations. In addition, Somaliland, which considers itself self-determining, is not part of the federal fiscal coordination framework. Somalia is expected to hold a presidential election in approximately three months later on May 2026. In this context, the Presidents of Puntland and Juba land are currently engaged in discussions in Mogadishu with the Federal President, alongside opposition leaders.
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