SOMALIA

RISK RATING
Severe
Default High Risk Score 9.00
Normal Average 8.10
Weighted Average 8.05
RISK RATING HISTORY
RISK RATING SCALE

Risk Rating Scale

Severe: 8.0 to 10
High: 6.0 to 7.9
Elevated: 4.0 to 5.9
Moderate: 2.0 to 3.9
Low: 0.0 to 1.9
EXCHANGE RATE
Country Outlook

As Somalia struggles to move forward with a timetable for both its parliamentary and presidential elections, increasing tensions between the country’s regional administrations and the central government threaten to erupt into violent conflict. The situation looks set to worsen in the coming months, as regional developments in the Horn of Africa create additional security burdens on the Somali state. The primary beneficiary of this outcome would be Al Shabaab, which is liable to take advantage of any evolving gaps in governance and security to exert its influence and widen its support networks. This growing instability threatens to undermine Somalia’s commercial environment, including the fledgeling oil and gas sector. A direct violent conflict between regional administration security forces and the federal government would further undermine foreign investor confidence and contribute towards delayed engagement by commercial operators.

  • The Federal Government of Somalia (FGS) and the semi-autonomous Federal Member States continue to struggle to reach consensus on a path forward. Much of the past year has been marked by disagreement and delay over the implementation of a new electoral law passed in February, which sought to replace the clan-based electoral model with a one-person-one-ballot system. Opposition leaders have accused President Mohamed Abdullahi Mohamed, known as ‚ÄúFarmajo,‚ÄĚ of attempting to initiate reforms which could not feasibly be implemented within the allotted timeframe in order to delay the vote on procedural grounds, and thereby extend his term in office.
  • External security support will remain crucial to act against threats of militancy and terrorism. The operating environment in Somalia remains at severe risk as a result of numerous security threats. Al-Shabaab continues to pose the primary security threat, having maintained its supremacy over jihadi violence in the Horn of Africa since 2007. IS-Somalia poses an additional source of insecurity. The group, which was previously limited to small-scale insurgent operations, conducted at a relatively low tempo mostly to the north of the country, almost immediately entered into conflict with al-Shabaab at the time of its emergence in 2015. Another potential setback to security emerged on 4 December, when the US announced that it would withdraw all US troops from Somalia by 15 January. The Federal Government is likely to continue to rely on AFRICOM to combat its militant threat.
  • Favoured investment partners are staking out positions of influence as the economy begins a recovery. President ‚ÄėFarmajo‚Äô, who was elected in February 2017, has made a clear attempt to attract fresh foreign investment into the country. However, such opportunities are guarded by several influential ‚Äėgatekeepers‚Äô. Somalia has qualified for debt relief under an arrangement known as the Heavily Indebted Poor Countries (HIPC) Initiative, although its progress may be frustrated by the impact of the coronavirus. The US has forged an influential position in Somalia potentially setting up its companies with a competitive advantage to develop oil assets. Other favoured investment partners like Qatar and Turkey are also staking out a position of influence over Somalia‚Äôs nascent oil sector.
CUMULATIVE AND DAILY COVID-19 INFECTIONS AND DEATH RATE
INTERNATIONAL MONETARY FUND | DATAMAPPER
Risk Perils
Political Instability
8.0
Expropriation, Nationalisation, Confiscation & Deprivation
8.0
Contract Frustration & Breach
8.0
Taxation
8.0
Bribery & Corruption
8.0
Regulatory Burden
8.0
Strikes, Riots & Civil Commotion
7.0
Security
8.5
Sovereign Default
9.0
Economic Volatiliy
8.5

Risk Rating Scale (small)

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