The Closure of USAID Deeply Impacts Somalia’s Economy

The Closure of USAID Deeply Impacts Somalia’s Economy

The closure of the U.S. Agency for International Development (USAID) earlier this year has dealt a major blow to Somalia’s economy and tax revenues, according to Hodan Osman, President of the Somali Development and Reconstruction Bank.

Speaking at the Financial Times Africa Summit in London, Osman said the sudden cut in foreign aid severely affected Somalia’s GDP and disrupted key sectors of the economy. “In Somalia, it really impacted our GDP,” she said.

The move came after former U.S. President Donald Trump decided to slash the foreign aid budget and shut down USAID, an agency that had long supported global health, education, and development initiatives.

Osman explained that the impact went far beyond development projects — the overall economy was hit in ways the government hadn’t anticipated. “It also had a severe impact just on the economy alone that we weren’t really thinking about,” she noted.

The reduction in aid funding led to slower economic activity and a decline in sales tax revenue for the government, exposing Somalia’s vulnerability to external financial shocks.

This situation highlights the urgent need for Somalia to diversify its sources of revenue and strengthen domestic economic resilience, ensuring that future growth is not entirely dependent on international assistance.