Somalia Faces Economic Strain as Hormuz Disruptions Cut Customs Revenue by 40%

MOGADISHU, Somalia — Somalia’s domestic revenue from customs duties has fallen by about 40% as disruptions in the Strait of Hormuz affected trade and increased import costs, term-ended President Hassan Sheikh Mohamud said in a speech to the United Nations General Assembly.

Mohamud said Somalia’s heavy reliance on goods imported from the Middle East had left the country particularly vulnerable to disruptions in the strategic waterway, through which a significant share of global energy and trade flows.

“The disruption has also resulted in approximately a 40% decline in our customs-based domestic revenue,” Hassan told the U.N. General Assembly on Thursday.

He said customs revenue was an important source of funding for economic reforms, growth and efforts to reduce poverty. The president did not specify the period covered by the 40% estimate or provide detailed figures showing customs revenue before and after the reported decline.

The president also said disruptions around the Strait of Hormuz had pushed up the prices of food and fuel in Somalia, as well as inflation, transport costs and insurance premiums for goods shipped to the country.

“Ensuring free and fair navigation through that waterway is critical to protecting vulnerable economies such as Somalia,” he said.

The president’s latest estimate follows figures previously presented by the Somali government on the impact of the Hormuz disruptions on the country’s import-dependent economy.

A report submitted by Somalia’s national statistics agency to the Cabinet in May said the volume of goods entering the country had fallen by nearly 40% during the disruptions. The government also reported that food prices had increased by 10%, while health-care costs rose by 14%, with some other goods recording even sharper increases.

The Cabinet subsequently directed relevant government agencies to take measures to ease the economic pressure on the population.

Somalia imports a large share of its food, fuel and other essential goods, leaving households and businesses exposed to higher shipping costs and disruptions to global supply chains.

The impact has extended beyond consumer prices to government finances. Customs duties collected on goods entering Somalia through ports and other entry points are an important component of federal domestic revenue and help finance government operations and public services.

A decline in imports can reduce customs collections at a time when higher transport and insurance costs are also increasing the prices paid by consumers.

Hassan said his government was continuing efforts to increase domestic revenue despite external economic pressures. He told the General Assembly that Somalia had strengthened public financial management and budget transparency while expanding the financial system and working to improve the investment climate.

The president said Somalia’s economy was expected to record real growth of 3.1% this year despite significant pressures from the global economy. He did not provide further details on how the disruption in the Strait of Hormuz was incorporated into that growth projection.

GAROWE ONLINE