The 2026 federal budget projects total revenues and grants of approximately $1.36 billion against expenditures of $1.39 billion, resulting in a fiscal deficit of about $29 million. Domestic revenue is expected to rise to $479 million, largely attributed to improvements in income taxes, goods and services taxes, and administrative fees. Nevertheless, customs duties and other import-dependent revenues remain highly exposed to external shocks, including global trade disruptions and fluctuations in external aid flows.

External grants account for $878.8 million, or 64.7 percent of total resources, with $174.4 million provided as direct budget support and $704.4 million allocated to donor-financed projects. This underscores the continued reliance on external financing and the dominance of project-based implementation modalities.

Sectoral allocations indicate increased spending on security, infrastructure, and administrative functions, alongside reductions in key social sectors such as health and social protection. At the same time, concerns persist regarding fiscal transparency and efficiency, including limited disclosure of public asset transactions and rising operational expenditures without corresponding performance reporting.

Regarding debt management, the budget underscores continued adherence to a cautious post-HIPC borrowing strategy. Debt-service obligations have declined substantially, from $13.8 million in 2025 to $7 million in 2026, and new financing remains concessional. At the same time, emerging fiscal risks are evident through government-backed guarantees and significant investments in state-owned financial institutions, including the Somali Development and Reconstruction Bank. These commitments may generate future liabilities if they are not supported by strong governance and oversight frameworks.