By Abdi GuledÂ
MOGADISHU, Somalia — Residents of the Somali capital are voicing their frustration over a new taxation system imposed on digital money transfers, a move that comes at a time when the cost of living is already straining household budgets.
“I can barely afford groceries as it is,” lamented Fatima Abdi, a mother of four, while standing in line at a local market.
“Now, with this new tax on mobile transactions, even sending money to my family in the countryside has become a burden.”
The new 5% VAT, introduced by the finance ministry, is said to be aimed at boosting revenue and improve public services.
However, many in Mogadishu, where mobile money has become a lifeline for everyday transactions, feel the policy adds an undue burden on their already stretched finances.
For Ahmed Hassan, a small business owner, the tax has meant rethinking how he manages his daily operations.
“We rely on mobile money for almost everything — from paying suppliers to receiving payments from customers,” he said.
“This tax is just another obstacle in an already challenging business environment.”
The introduction of the tax coincides with rising prices for essential goods. The price hike, attributed to global supply chain disruptions and local economic factors, has made it increasingly difficult for families to make ends meet.
Hawa Osman, a school teacher, expressed a common sentiment among her peers.
“Our salaries have not increased in years, but everything else has. This new tax on mobile money is the last thing we need,” she said.
Government officials argue that the tax is necessary to fund crucial infrastructure projects and public services.
But, despite assurances from the government, many residents remain skeptical amid growing calls by community leaders for the state leaders to take into consideration of the economic pressures faced by ordinary citizens.
A Double-Edged Sword
In a city where mobile money has revolutionized financial transactions, the Somali government’s decision to impose a tax on mobile money transfers has sparked a heated debate.
Bihi Igeh, Somalia’s finance minister argues that the tax is a necessary step toward economic improvement, while critics contend that it places an undue burden on a populace already grappling with rising living costs.
As the sun set over Mogadishu, Fatima Abdi sighed, clutching her bag of groceries a little tighter.
“We are trying to build a better future for our children,” she said. “But with every new expense, that future seems a bit further out of reach.”
The new tax, it appears, has not only added to the financial burden but has also deepened the sense of uncertainty and frustration in a city already grappling with many challenges.
Meanwhile, In Somalia, where formal banking infrastructure is relatively new, mobile money services have become a cornerstone of the economy.
Companies like Hormuud, with its EVC Plus  have enabled millions of Somalis to conduct transactions seamlessly, from urban centers to remote villages.
Mobile money facilitates everything from daily market purchases to remittances, which constitute a significant portion of the country’s GDP.
“Mobile money has democratized financial services in Somalia,” notes Abdirahman Hassan, a local economist.
“It has provided financial inclusion to many who were previously unbanked.”
A Necessary Evil?
The Somali government defends the new tax as a crucial step to increase state revenue and improve public services.
Indeed, the need for improved public services is undeniable.
Decades of conflict and instability have left Somalia with dilapidated infrastructure and underfunded public institutions.
However, the timing of this tax has raised concerns.
With prices for everyday essentials like food and fuel on the rise, many Mogadishu residents feel squeezed from all sides.
A recent survey indicated that the cost of basic food items has increased by an average of 20% in the past year, exacerbating the financial strain on households.
“The introduction of this tax could not have come at a worse time,” argues Bile Hashi, a school teacher.
“People are already struggling to make ends meet. Adding a tax on mobile money transactions feels like adding insult to injury.”
Small business owners, too, are feeling the pinch.
Mobile money is integral to their operations, from paying suppliers to receiving payments.
The new tax adds an additional layer of complexity and expense, potentially stifling entrepreneurial activity in a city that desperately needs economic growth.
Meanwhile, some economists insist that the challenge for the Somali government lies in balancing the need for increased revenue with the economic realities faced by its citizens.
Some experts also suggest phased implementation or exemptions for low-income users as potential solutions.
“A more nuanced approach could help mitigate the immediate impact on vulnerable populations while still achieving the goal of increased revenue,” suggests Farah Abdullahi.
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