Somalia stands at a critical juncture. For over three decades, the country has relied extensively on foreign aid to keep the state and society afloat. International donors finance over 60% of the government’s operating budget, which underpins everything from civil service salaries to education, health, and food distribution. In the absence of domestic revenue mobilization and a functioning financial system across much of the country’s territory, aid has filled both governance and service delivery vacuums.
Beyond basic services, the aid ecosystem has evolved into a dominant source of employment. Thousands of Somalis are directly employed by the humanitarian and development sector—working in field coordination, monitoring and evaluation, logistics, communications, security, and data management. For many educated youth and professionals, NGOs and international organizations provide the most stable and well-paying employment opportunities, particularly in urban areas like Mogadishu, Hargeisa, and Baidoa. This widespread dependence on externally funded institutions is not just economic—it has reshaped the country’s political economy, workforce distribution, and even the urban labor market structure.
Yet, this aid-dependent model is facing increasing pressure from both sides: internal demand is rising due to recurring climate shocks, population growth, and conflict displacement, while external support is increasingly uncertain.
- A Global Retrenchment: The Politics of Shrinking Aid and Its Local Consequences
The global aid architecture is entering a period of retrenchment. Geopolitical competition, rising domestic fiscal constraints, and competing humanitarian crises have led many donor countries to scale back their commitments—particularly to protracted crises with no clear exit path. Somalia, as one of the most aid-dependent states in the world, is acutely exposed to these shifts. In 2023, several European donors including Sweden, Norway, the Netherlands, and Germany restructured their development cooperation budgets, cutting back on long-term projects and prioritizing domestic and regional security concerns. The United Kingdom’s decision to reduce its aid-to-GNI ratio from 0.7% to 0.5% resulted in over £4 billion in annual aid cuts, with programs in countries like Somalia among the first to be affected. Health, nutrition, and governance initiatives once financed through the FCDO were either cancelled or consolidated into broader regional portfolios.
In the United States, foreign aid has become increasingly politicized, with growing bipartisan scrutiny over its scope and purpose. Humanitarian funding to Somalia remains significant—especially during severe droughts—but disbursements have become slower, less predictable, and more fragmented. A broader shift toward short-term emergency relief, as opposed to long-term development planning, has taken root. This was further reinforced during the Trump administration. In 2020, President Donald Trump attempted to dismantle USAID’s independence by pushing to fold it under the U.S. State Department and slash its budget by over 30%. Although Congress ultimately resisted full implementation, the proposal sent a strong signal to the development community: the U.S. was no longer fully committed to leading the global aid agenda. In his second term, several USAID programs were cut or frozen. These actions set the tone for a period of uncertainty in U.S. foreign assistance that continues to reverberate across many low-income countries.
The cumulative effects of this aid contraction are already visible on the ground. In 2025, the World Food Programme (WFP) reported that nearly 4.4 million people in Somalia could face hunger due to worsening drought conditions, conflict, and high food prices. Funding shortfalls have forced WFP to halve the number of students it supports with school meals, with programs in Southwest State, Banadir, and Somaliland entirely suspended. Youth skills training initiatives supported by ECHO, the Italian Development Cooperation, and the EU Trust Fund for Africa have either been suspended or placed under review, as the EU Trust Fund ceased contracting new funds for operations at the end of 2025. Furthermore, critical infrastructure projects such as rural feeder roads and renewable energy microgrids—once supported by European development finance institutions—have stalled due to uncertainty in funding flows. While Somalia launched an ambitious solar minigrids program in 2023 to increase access to electricity, the implementation of such projects faces challenges amid the broader funding constraints.
This is not merely a budgetary issue; for Somalia, it is a developmental inflection point. The contraction of global aid threatens to undermine both institutional stability and public welfare. It also calls into question the sustainability of a model where state functioning, public service delivery, and even employment are deeply entwined with donor presence. A structural shift is therefore necessary—one that moves from externally-funded fragility toward internally-driven economic capacity. In this context, Aid for Trade (AfT) is not just a technical adjustment—it is a transformational development strategy for Somalia’s next chapter.
- Aid for Trade (AfT) Strategy
Aid for Trade refers to donor support that helps developing countries build the capacities and institutions required to participate more effectively in international trade. The framework includes assistance for trade-related infrastructure, logistics, customs modernization, standards and certification, and value chain development. Since its formalization under the WTO Doha Development Agenda, AfT has been recognized as a crucial tool for linking aid with long-term economic transformation. In many low-income countries, AfT has supported cross-border infrastructure development, market integration, and industrial upgrading. Rwanda, for instance, has used AfT to build a thriving export-oriented horticulture sector, supported by cold storage, air cargo facilities, and a streamlined export certification regime. Plus, Ethiopia channeled AfT to establish industrial parks and customs modernization, which created competitive export zones linked to European and Chinese markets.
Somalia, by contrast, has remained on the margins of AfT allocations. Due to insecurity, weak institutions, and limited absorptive capacity, Somalia has received less than 0.1% of global AfT flows. Much of the donor presence has focused on humanitarian assistance and peacebuilding rather than productive sector development or export facilitation. This underutilization of AfT is a missed opportunity. Somalia’s export potential in livestock, fisheries, sesame, gums, and hides remains largely untapped. With AfT targeted toward building trade-enabling systems—ranging from port modernization and cold chain logistics to trade finance access—Somalia could not only improve export performance but also reduce vulnerability to aid withdrawal. Rethinking AfT in Somalia means adapting the framework to fragility: prioritizing local ownership, de-risking investment, and integrating AfT into broader state-building and peacebuilding goals. AfT in this context is not about complying with trade liberalization norms—it is about building the institutional and infrastructure foundations of a sovereign economy.
- Structural Constraints and Missed Opportunities
Despite immense trade potential, Somalia continues to face deep-rooted structural barriers that limit its integration into regional and global markets:
- Institutional fragmentation: Trade regulation is split across federal and state authorities, which led to overlapping mandates, inconsistent enforcement, and confusion for exporters. Customs procedures vary across ports, and revenue-sharing mechanisms are often contested.
- Infrastructure gaps: Roads connecting interior production areas to major ports remain poorly maintained or non-existent. Berbera Port, despite improvements through DP World investments, lacks supporting logistics corridors and last-mile connectivity. Cold storage, warehousing, and digital logistics infrastructure are severely underdeveloped.
- Trade finance and insurance constraints: Somali businesses, especially SMEs, lack access to affordable trade finance or export insurance, which limits their ability to compete in high-value markets. Remittance-based microfinance systems are not enough for cross-border trade scaling.
- Value addition and diversification gaps: Somalia primarily exports raw materials—unprocessed livestock, fish, and agricultural products. This limits both income potential and job creation. Processed goods such as canned tuna, leather, essential oils, or sesame oil could fetch significantly higher returns.
- Limited institutional voice in AfT discourse: Somalia has not fully institutionalized a mechanism for engaging in regional or multilateral AfT negotiations, unlike neighbors like Kenya or Ethiopia.
These constraints have translated into missed opportunities. Somalia remains Africa’s largest exporter of goats and sheep, but Saudi-imposed bans on Somali livestock due to health and certification concerns periodically disrupt trade. With a proper veterinary certification system backed by AfT investments, these shocks could be avoided. Similarly, Somali sesame—coveted in Chinese and Turkish markets—could enter high-end segments with basic processing and packaging support.
- A Sovereignty-Driven Aid for Trade Agenda in Somalia
Somalia requires an AfT strategy that is not merely coordinated by donors, but envisioned, led, and implemented by Somali institutions. At this critical turning point, the imperative is to chart a development pathway that builds independent trade capacity even amid declining external support. The foundation of such a strategy must rest on institutional reform. Establishing a centralized AfT coordination mechanism—linking the Ministry of Commerce, the Ministry of Planning, and the Somali Chamber of Commerce—would help consolidate trade-related investment planning, streamline donor engagement, and foster a coherent public-private dialogue. Such a platform would reduce duplication and anchor trade development in nationally determined priorities. Equally vital is the development of infrastructure with direct trade multipliers. Strategic investment in logistics corridors connecting production hubs such as Baidoa, Beledweyne, and Jannale to ports like Mogadishu, Kismayo, and Berbera would reduce costs and improve market access. Integrating solar-powered cold storage units, particularly in fisheries-rich regions like Puntland and livestock corridors in Jubaland, could drastically reduce post-harvest losses and improve export quality standards.
Regional integration must also be aggressively pursued. Somalia’s recent accession to the East African Community (EAC) provide opportunities to reach over 300 million regional consumers. AfT should support Somalia in harmonizing trade documentation, simplifying cross-border procedures, and adopting digital trade systems to ensure Somali exporters can fully benefit from regional markets. This also means investing in capacity building to help Somali firms comply with product standards, rules of origin, and quality assurance mechanisms. To maximize value capture, AfT must focus on building integrated value chain hubs in Somalia’s comparative advantage sectors—livestock, fisheries, sesame, and gums. Industrial clustering around these sectors, supported by SME grants, export credit facilities, and incubation services, would enhance productivity and create jobs, especially for youth and women. Diaspora engagement is another untapped lever. The Somali diaspora sends remittances as well as possesses business knowledge and networks. Future AfT initiatives should provide structured channels for diaspora co-financing in agribusiness, logistics, and export-oriented digital platforms.
Importantly, a new AfT framework must also blur the lines between humanitarian assistance and trade development. Food aid, for example, should be gradually shifted toward local procurement strategies that support domestic agriculture. Building procurement systems that link humanitarian demand with Somali producers would stimulate local economies and reduce dependency on imports. Somalia’s future cannot be built on an aid model in retreat. The ongoing contraction in global development assistance is both a formidable challenge and a rare opportunity to rethink what development should mean in our context. If humanitarian aid was once a stabilizer, trade must now be seen as the engine of transformation. Properly deployed, Aid for Trade provides a roadmap toward economic sovereignty. It can anchor long-term investment, diversify income sources, generate employment beyond the aid sector, and equip the Somali economy to withstand climate, security, and geopolitical shocks. Yet this transition is not automatic. It requires political will, strategic discipline, and alignment across national institutions, regional frameworks, and global partnerships. Somalia has the potential. The world has the tools. The moment demands the convergence of both—through a smarter, sovereignty-driven Aid for Trade agenda.
Abdikafi Hassan Abdi, Head of Research, ICE Institute, SIMAD University
