According to Somalia Business Review issued recently, Somalia's economy faces numerous challenges due to a combination of internal and external factors, Long-standing instability due to militant groups like Al-Shabaab continues to hinder investment, economic activities, and infrastructure development. This insecurity makes certain areas inaccessible and limits economic growth opportunities. Besides, clan base skirmishes and competitions over scares resources like water and pastureland that are observed over several seasons create unfavorable conditions for the population to move from place to place in search of fodder for their livestock.
Moreover, frequent droughts, flooding, and unpredictable weather conditions have heavily impacted agriculture, which is a key economic sector. Climate events increase food insecurity, displace communities, and strain limited government resources.
Somalia struggles with fragile institutions, limited administrative capacity, and inadequate regulatory frameworks. This weak governance makes economic reforms difficult and discourages foreign and local investment. The state of governability and governance in Somalia over the last several decades have shown no improvement as both the federal and local governments are weak to plan, implement and coordinate the management of the national economy
Somalia has one of the highest poverty rates in the world, with a significant portion of the population living below the poverty line. Limited job opportunities, especially for youth has continued to force them to join various terrorist groups contributing to social unrest and hinder economic development.
The nation's economy relies heavily on remittances from the diaspora, which makes it vulnerable to external economic shocks in host countries. While remittances provide vital support, they are not a stable foundation for economic growth.
Moreover, Somalia's infrastructure is underdeveloped, with inadequate roads, ports, and energy supply. This hampers trade, limits industrial growth, and restricts economic diversification. Although there is a central banking system in Somalia, the country lacks adequate operational model for the banking process in the country.
Domestic revenue collection is insufficient to meet development needs. This lack of revenue limits public service provision and makes Somalia heavily reliant on foreign aid. Recently, the USA wrote off more than one billion outstanding debt that was accumulated for more than two decades.
Inflation, particularly in food prices, has been a persistent challenge, eroding purchasing power. Currency instability and a lack of formal banking systems also hinder economic activities.
Efforts are underway to address some of these issues, with Somalia recently joining the East African Community (EAC) and collaborating on security reforms with the African Union. However, sustained development requires stabilizing the security situation, improving governance, and building economic resilience through infrastructure and institutional development.
The military agreement concluded between Somalia and Egypt and the triple alliance created by Somalia, Egypt and Eretria to shock Ethiopian's economy by destabilizing the country and attempting to deny the nation of her rightful access to ports seems to fall apart.
The political tension between the Federal Government of Somalia and the regional states has continued to escalate. Regional states like Jubaland have now openly declared that they have nothing to do with the central government and are working on establishing their own electoral commission to run their own government.
What can both Somalia and Egypt benefit from the mess that is now created in the country? The author believes that there is no benefit for both countries but more crises that could engulf Somalia is in sight. This is not in par with the desire that Egypt is upholding to control the East African region and more particularly the Horn of African and the Red Sea route.
Ethiopia is on guard to protect her own territory and the sovereignty of the country while also showing clear interest in continuing to participate in the new peace keeping mission in Somalia which is expected to start in January 2025. The last 17 years have shown that the ENDF peace keeping force in Somalia is the only reliable force that can keep Al-Shabab at bay.
The Ethiopian peace keeping forces have already cemented strong relationship with the people of Somalia and contrary to the calls by the Federal Government to expel Ethiopian peace keeping mission, the Somalis are insisting that the Ethiopian peace keeping forces should continue to serve in Somalia.
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The militarization of Somalia by the Egyptian government has not been instrumental in strengthening Somali defense forces but has only helped to strengthen Al- Shabab and other terrorist groups roaming the country with no hindrance. Most of the armaments are now ending up in the hands of the terrorist groups as already predicted by the current President of Ethiopia Taye Aktselassie and former foreign minister of Ethiopia.
The international community is watching the entire political situation in East Africa but no organization or country has managed to come up with a viable strategy that could help to avert the revival of terrorism in Somalia and the resurgence of sea piracy in the Rea Sea.
The following months have a lot to reveal for the Horn of Africa and if things do not work out well in resolving the situation in a more rational and diplomatic manner, the geography of the Federal Republic of Somalia might be altered with a formation of independent states that could secede from mainland Somalia creating an entirely different political landscape on the Horn of Africa.
