# Somalia's economic history, 1920s to today > A sourced history of Somalia's economy: colonial plantations, the 1960s republic, scientific socialism, debt and IMF reforms, the 1991 collapse and the private-led rebuild. Source page: https://calankii.com/en/economy/economic-history/ Last checked: 2026-11-12 Publisher: Calankii (https://calankii.com) ## Before independence Colonial rule brought little investment. Italy ruled the south, Britain the north and France the area that became Djibouti. In 1947 the whole budget of the British protectorate was only £213,139 ([US Library of Congress, Somalia country study](http://countrystudies.us/somalia/57.htm)). In the south, Italian settlers built plantations along the Shabelle River from 1919. They grew cotton, sugar and bananas. Banana exports to Italy began in 1927 and grew under Italian tariffs that kept out other bananas; by 1955 the plantations produced 94,000 tons. A sugar estate near Jowhar met about 80 percent of the country's demand by 1950 (same source). In both north and south, a new class of Somali civil servants, teachers, soldiers and traders grew up (same source). The money of the south was the somalo from 1950, and the Somali National Bank opened on 4 July 1960 ([Central Bank of Somalia, History](https://centralbank.gov.so/history/)). ## The young republic, 1960 to 1969 At independence most Somalis lived from herding and farming. The new state could collect customs at ports but found it hard to tax herders and farmers. Italian and British subsidies paid about **31 percent** of the government's running budget in the first three years ([Library of Congress](http://countrystudies.us/somalia/58.htm)). A five-year plan of 1963, worth more than $100 million in grants and loans, built roads, ports and irrigation, and set up model farms in Baidoa, Afgooye and Tog Wajaale. In the early 1960s the value and number of animals exported about doubled, and livestock overtook bananas as the leading export. The country became nearly self-sufficient in sugar (same source). But the budget still depended on foreign aid, and grain imports rose quickly as towns grew (same source). ## State control, 1970 to 1980 After the military took power in October 1969, the government declared Somalia a socialist state on 20 October 1970. The Somali word chosen for socialism was **hantiwadaag**, which can be translated as "sharing of livestock"; herds were not nationalised ([Library of Congress](http://countrystudies.us/somalia/59.htm)). - The state **nationalised banks**, insurance, fuel distribution and the sugar factory, and created state agencies for building materials and food (same source). - Spending on farming rose from under 10 percent of the budget to 29.1 percent by 1974, much of it on cooperatives (same source). - During the 1974 to 1975 drought, the government, with Soviet help, moved about **90,000 herders** to new farming and fishing cooperatives in the south (same source). After the 1977 to 1978 Ogaden war, debt rose faster than exports. By the end of the 1970s, debt equalled 4 billion shillings, owed in roughly equal thirds to socialist countries, Western countries and Arab oil producers. Factory output fell: canned meat dropped from 14.4 million cans in 1975 to 1.5 million in 1979 ([Library of Congress](http://countrystudies.us/somalia/60.htm)). ## Debt and IMF reforms, 1980 to 1990 From 1980 Somalia turned to the IMF and World Bank. Agreements in 1981 and 1982 ended the state's role as employer of last resort for school leavers and its monopoly on grain trading. In 1983 Saudi Arabia stopped importing Somali cattle, citing disease, then sheep and goats, which hit export earnings and the budget ([Library of Congress](http://countrystudies.us/somalia/61.htm)). In 1985 the Paris Club rescheduled Somalia's debt, the shilling was devalued, and a free market for foreign exchange was opened for most private trade. A foreign exchange auction began in 1986. By 1988 a law allowed private banks (same source). Official figures for the 1980s showed falling income per person, but much of the real economy was outside them. About **165,000 Somalis worked abroad**, mostly in Arab countries, and one estimate put their remittances at over $330 million a year, against $30 million recorded through banks ([Library of Congress](http://countrystudies.us/somalia/64.htm)). Livestock traders kept 60 percent of their foreign earnings to import goods under a system called *franco valuta* (same source). ## Collapse and private rebuilding, 1991 to 2012 In January 1991 the state collapsed and the Central Bank stopped working ([Central Bank of Somalia, History](https://centralbank.gov.so/history/)). With no banks, **money transfer companies** carried money from relatives abroad and held deposits for families, firms and aid agencies ([Rift Valley Institute, 2014](https://riftvalley.net/wp-content/uploads/2018/06/RVI-Challenges-for-the-Somali-Money-Transfer-Sector-March-2014.pdf)). Private telecom companies built mobile networks, and by the late 2000s mobile money spread. By 2012, remittances were at least $1.2 billion a year, more than aid, exports or foreign investment (same source). ## Rebuilding the state's institutions, 2012 to today - **2012:** the Central Bank was re-established by law ([Central Bank of Somalia, History](https://centralbank.gov.so/history/)). - **2019 to 2021:** mobile money rules, then the first mobile money licence ([VOA](https://www.voanews.com/a/africa_somalia-issues-first-license-mobile-money-service/6202644.html)). - **December 2023:** debt relief under HIPC, worth $4.5 billion ([IMF](https://www.imf.org/en/News/Articles/2023/12/13/pr23438-imf-and-world-bank-announce-us-4-5-billion-in-debt-relief-for-somalia)). - **2024:** Somalia joined the East African Community ([EAC](https://eac.int/press-releases/3049-somalia-finally-joins-eac-as-the-bloc-s-8th-partner-state)). - **2025:** instant payments, the first microfinance licences, and bank assets of $2.3 billion ([Central Bank of Somalia, Annual Report 2025](https://centralbank.gov.so/wp-content/uploads/2026/08/Annual-Report_2025.pdf)). See [Somalia's economy at a glance](/en/economy/economy-at-a-glance/) for today's numbers. --- I want to help with this: email hello@calankii.com. Fix this page: email hello@calankii.com with the page link and your source.