Somalia - Joint World Bank-IMF Debt Sustainability Analysis

Overview & Synopsis

This Low-Income Countries Debt Sustainability Analysis (LIC-DSA) provides a streamlined update to the June 2025 LIC-DSA, with four new elements: (i) a US$50 million increase in budget support grant by the World Bank in 2025 as part of the International Development Association (IDA)21 allocations, (ii) the authorities’ requested augmentation of access under the ECF program, (iii) planned external borrowing over the medium term, and (iv) updates to debt relief negotiations as well as macroeconomic forecasts. These factors do not change Somalia’s moderate risk rating for external and overall public debt distress, as assessed in the June 2025 LIC-DSA. Total public debt is projected to increase marginally to US$1,155.2 million in 2025 from US$1,117.2 million in 2024, with the public debt-to-GDP ratio largely stable at 8.9 percent in 2025. Most public debt is external. The present value (PV) of public and publicly guaranteed (PPG) external debt is estimated at 4.6 percent of GDP in 2025 - below the 30 percent threshold for countries like Somalia with weak debt carrying capacity. However, the LIC-DSA involves a breach of the external debt service-to-revenue indicative threshold in the stress scenario, driven primarily by the increase in debt service associated with future new borrowings, which are in turn triggered by shocks to other non-debt creating flows (current transfers and FDI). Somalia is mechanically assessed to have substantial space to absorb shocks. However, the country continues to be vulnerable to security, commodity price, slower global growth, and climate shocks. It is highly dependent on external financial assistance - broader and more persistent declines in foreign aid can thus have a significant economic impact. These vulnerabilities underscore the importance of accelerating domestic revenue mobilization, adopting a credible medium-term fiscal anchor to ensure sustainability, and strengthening debt management and broader institutional capacity.