Somalia’s Economy Faces Growing Pressure Amid Drought, Inflation, and Declining Foreign Aid

World Bank warns that worsening economic conditions could threaten livelihoods and deepen humanitarian challenges across the country

By Danielle Harper Coleman

Somalia’s economy is facing increasing strain as prolonged drought, rising inflation, and declining international aid continue to slow economic growth and place millions of livelihoods under pressure, according to a new assessment released by the World Bank.

The report highlights growing concerns over Somalia’s economic stability as the country struggles to recover from years of insecurity, climate-related disasters, and dependence on external financial support. While Somalia has recorded gradual economic progress in recent years, analysts say the current combination of environmental and financial pressures is creating fresh uncertainty for businesses, households, and government institutions.

According to the assessment, recurring drought conditions have severely affected agriculture and livestock production — two sectors that support a significant portion of Somalia’s population. Reduced rainfall and water shortages have damaged farmlands, weakened food production, and increased pressure on rural communities already facing economic hardship.

At the same time, inflation and rising living costs continue to impact households across the country, making basic goods and essential services increasingly difficult to afford. Experts say food prices, transportation costs, and fuel expenses have remained volatile, worsening the financial burden on ordinary citizens.

The report also points to declining international humanitarian and development aid as a major factor affecting Somalia’s economic outlook. Somalia has long depended on foreign assistance to support critical sectors including healthcare, education, food relief, and infrastructure development. However, shifting global priorities and reductions in donor funding are reportedly limiting the country’s ability to respond effectively to humanitarian and economic challenges.

Economic experts warn that reduced aid flows could have serious consequences for vulnerable communities, particularly in areas affected by conflict, displacement, and climate shocks. Humanitarian agencies estimate that millions of Somalis remain at risk of food insecurity and poverty if conditions continue to worsen.

Despite the challenges, Somali authorities say efforts are ongoing to strengthen domestic revenue generation, improve financial reforms, and encourage investment in key sectors of the economy. International financial institutions have also acknowledged Somalia’s progress in debt relief and governance reforms over recent years, although they stress that long-term stability will require sustained investment and stronger resilience against climate-related crises.

Analysts note that climate change remains one of the biggest threats to economic growth across the Horn of Africa, with Somalia among the countries most vulnerable to extreme weather conditions despite contributing minimally to global emissions.

The report has renewed calls for stronger international support and regional cooperation to address food insecurity, environmental challenges, and economic vulnerability across East Africa.

As Somalia continues navigating political, security, and environmental pressures, observers say the country’s economic recovery will depend heavily on both domestic reforms and continued international engagement in the years ahead.