Federal transfer payments are a rarely understood concept among the Somali public. This is partly due to the fact that the federal government is responsible for managing and distributing both the international donor funds and the domestic revenues while the states bear primary responsibility for delivering most social services. The Federal government and the international partnersoften justify this on fiscal efficiency and regional fiscal equity grounds. Political imperatives to maintain a shared sense of political alignment (or loyalty if you will) and economic union with the Centre have paved the way for instituting such transfer. There is also a common consensus that conceptually these transfers should equalize both the fiscal capacities and fiscal needs to a specified standard.
In Somalia, resentment over international aid distributionhas always been present to some extent in parts of the county. This resentment is now being expressed more formally following the Federal government’s launch, this week, of a major governance initiative in partnership with the World Bank. The initiative aims to strengthencommunity and local institutions for social cohesion, inclusion, and resilience, yet it excludes the country’snewest state- arguably the state most need of such support- from the list of the beneficiary states.
The project known as Bulsho comprises four components and allocates $35 million to federal member states, with 6 states receiving $6 million each, geared towards improving service delivery. According to the World Bank documentation, the federal government has earlier requested that the World Bank provide anchor financing for the program over a ten-year period, with the intention that Bulsho’s institutional framework will guide future donor engagement and other development partner programs as well as the World bank operations. The project is expected to operate in Galmudug, Hirshabelle, Southwest State,Jubaland, Puntland, and Somaliland.
The project’s name implies social cohesion, yet a significant portion of the country has been excluded. In a news release issued on April 28, the Federal Government of Somalia responded to the criticism by stating that the project proposal had been consulted on with all federal member states between March 2023 and March 2024, and that the World Bank approved the submission in April 2025, which predates the formation of Northeast State. While this timeline maybe accurate, it raises a more fundamental question: Even before the formal establishment of Northeast State, did the federal government make any special funding provisions for rapidly growing cities in Northeast? It’s apparent that the federal government has both the authority and discretion to request a readjustment of the funding framework to ensure that Northeast State gains access to this critical support. This would help ensure that all regions benefit equitably from international assistance and development opportunities.
This has come as a shock for many analysts, myselfincluded, particularly because Villa Somalia appears tohave weaker incentives to exclude Northeast State in the distribution of project for several reasons:
a) The current administration in Villa Somalia officially recognized the formation of the state after it has met all the state building requirements. This recognition followed an intensive reconciliation and community-driven election process overseen by the Minister ofInterior and Federal Affairs, who spent 53 days in Laascaanood to manage disputes and ensure inclusive election process. This recognition alone should make the state eligible for the same support and subsidies other states receive.
b) The state’s leader President Abdulkadir Firdhiye has demonstrated unwavering loyalty and political alignment with Villa Somalia, including being one of the top leaders of the President’s party JSP. Firdhiye, a rookie who has no prior political or even government experience has remained steadfastly loyal to President Hassan Sheikh Mohamud, even during periods of intense controversy, including unilateral constitutional amendment efforts that lacked both broad political consensus and due processes. If loyalty and cooperation matter in Somalia’s political economy- as experience suggests they do-then North East State has checked every box.
c) A more fundamental point that cannot be ignored. Bulshoproject is an internationally funded development project provided in the name of Somalia as a whole. These resources are meant to improve living conditions, strengthen governance, and enhance resilience for Somali citizens regardless of where they live. Excluding an entire federal member state-particularly the newest and most fragile one-undermines both the spirit and the stated objectives of the program.
The timing of this announcement also raises uncomfortable questions, with the federal government mandate nearing its end, the decision signals a political (mis) calculation. While the analyses of distributive politics often examine the role of electoral politics on developmental projects since they are visible and easy to target geographically, yet Villa Somalia seems to have underestimate the weight of Northeast MPs and constituencies. Because these are important conditions if the objective of policy makers in Villa Somalia is to (re)gain electoral support in this region. Indeed, the publicgenerally reward governments for additional spending in their districts. However, a caveat to consider in this contextis that Federal investments targeted at regions-even when justified by need, urgency, or national priorities-can have unintended political consequences elsewhere in the country.
Northeast State is being penalised not because of poor performance or noncompliance, but because of a failure of imagination at the federal level. By denying the state access to funds that are intended to equalise service delivery across the country, the federal government risks reinforcing perceptions that national unity is conditional and uneven. Cities such as Laascaanood and Buuhoodle deserve access to public services comparable to those offered elsewhere in Somalia. Anything less damages unity and weakens trust in the federal system itself.
If the Federal Government of Somalia is serious about building a functional and inclusive system, transfer mechanisms must serve their original purpose. They are not tools for punishing politically inconvenient regions, nor rewards reserved exclusively for strong or wellestablished states. Their purpose is to ensure that every federal member state can meet minimum standards of governance and service delivery.
What, then, should be done?
In the short-term, the federal government should request an amendment to the approved project and commit a specific, separate allocation for Northeast state. Beyond this, the federal government should urgently engage federal member states in establishing a transparent and harmonised international donation framework. An equalisation formula, which could be based on population size, fiscal capacity, development gaps, or a combination thereof. This should be agreed upon collectively and applied consistently. Such a system would not eliminate political tensions overnight, but it would reduce arbitrariness, narrow disparities, and rebuild public confidence in a federal project that too often feels selective. Somalia’s newest state is not too young to be funded. It is simply too important to be ignored.
Mohamed Hassan is an intergovernmental affairs specialist with over 10 years of experience working at federal, provincial, and municipal levels in Canada. He focuses on public policy and governance and currently works as a Senior Policy Advisor with the Ministry of Environment and Climate Change.