Keypoints:
- EU commits €102 million in direct budget support to Somalia
- Funds aimed at sustaining public services and reform momentum
- Deal reflects growing donor confidence in fiscal governance
SOMALIA and the European Union have signed a €102 million financing agreement designed to strengthen the country’s national budget and reinforce ongoing public sector reforms, according to officials familiar with the deal.
The agreement was concluded in Mogadishu following high-level consultations between Somali government leaders and EU representatives, marking one of the bloc’s largest recent budget-support commitments to the Horn of Africa nation.
The funding will be channelled directly into Somalia’s federal budget to help sustain essential public services, stabilise government operations and deepen fiscal reforms, at a time when authorities are seeking to consolidate economic recovery after decades of conflict and institutional fragility.
Direct support for government spending
Unlike project-based aid, the €102 million package will be provided as budget support, allowing the Somali government to allocate funds toward recurrent expenditures such as civil servant salaries, health care delivery and education services.
Officials say this approach is intended to improve predictability in public financing and reduce dependence on emergency funding and fragmented donor projects.
Somalia’s Ministry of Finance said the agreement aligns with the country’s National Development Plan, which prioritises domestic revenue mobilisation, public financial management reforms and improved transparency in state institutions.
Finance Minister Biixi Imaan Cige described the deal as a critical step in strengthening government capacity, noting that reliable budget support has played a central role in recent fiscal stabilisation efforts.
‘This partnership reinforces our reform agenda and supports the systems that keep public services functioning,’ the minister said during the signing ceremony, according to Hiiraan Online.
Backing reform momentum
EU officials said the agreement reflects confidence in Somalia’s reform trajectory, particularly progress in revenue collection, treasury management and budget oversight.
Over the past several years, Somalia has introduced new tax systems, strengthened customs administration and improved expenditure tracking — reforms that development partners say are essential for long-term state sustainability.
The EU delegation noted that budget support is tied to continued commitments on governance, accountability and institutional strengthening, with performance benchmarks embedded in the financing framework.
Development analysts say such conditional support is increasingly favoured by donors seeking measurable reform outcomes rather than short-term humanitarian interventions.
Economic stability amid persistent challenges
The funding arrives as Somalia continues to face major economic and security pressures, including climate shocks, displacement, and the high costs of maintaining security operations.
While the country has made gains in macroeconomic management — including progress following debt relief — fiscal space remains limited, with domestic revenues covering only a portion of national expenditure.
By injecting predictable financing into the budget, officials believe the EU package will help cushion volatility and preserve essential government functions during periods of external stress.
The agreement was signed in the presence of senior Somali cabinet officials and representatives of the EU Delegation to Somalia, underscoring what both sides described as a long-term strategic partnership.
Long-standing partnership
The European Union remains one of Somalia’s largest development partners, providing assistance across governance, security, humanitarian response and economic reform.
In recent years, EU support has increasingly shifted toward institution-building and fiscal governance, reflecting international efforts to move Somalia away from emergency aid toward sustainable state financing.
Officials said the €102 million deal represents a continuation of that strategy, linking financial support directly to reform delivery and national ownership.
As Somalia works to strengthen its economic foundations, the agreement is expected to play a key role in maintaining reform momentum while safeguarding the delivery of public services nationwide.
