Minneapolis, United States – A new U.S. tax on money transfers is raising alarm across Africa, with economists and aid groups warning that it could sharply curtail remittances to countries like Somalia, depriving millions of families of a financial lifeline at a time when foreign aid is also drying up.

The measure, part of former President Donald Trump’s “One Big Beautiful Bill,” imposes a 3.5% levy on remittances sent by non-citizens. Passed by the House of Representatives in May and later amended by the Senate to a 1% flat tax on all remittance senders, the policy is set to take effect on January 1, 2026.

Though pitched as a way to help fund a $170 billion immigration enforcement package, the tax is expected to hit some of the world’s poorest communities hardest—particularly in nations where remittances far outweigh foreign aid.

Somalia’s economy at risk

Few countries stand to lose as much as Somalia, where remittances form the backbone of economic survival. In 2023, the Somali diaspora sent home approximately $1.73 billion, exceeding the combined amount of all humanitarian and development aid. According to the World Bank, these funds account for between 30% and 50% of Somalia’s GDP, helping to cover essential services such as food, education, clean water, and healthcare.

The timing of the new tax coincides with the U.S. scaling back direct assistance. In early 2025, the Biden administration suspended a significant portion of its foreign aid, including over 40% of funding for Somalia previously channeled through USAID. The combined effect of shrinking aid and taxed remittances is what many analysts are calling a “double blow” to vulnerable households.

The Center for Global Development (CGD) estimates that a 3.5% tax could reduce formal remittance flows by 5.6%, cutting household income and weakening consumer demand in low-income countries. For Somalia, this translates into millions in lost revenue—and increased hardship for families who are already struggling.

The impact won’t stop at Somalia’s borders. In 2024, African countries received more than $92 billion in remittances, with $12 billion coming from the U.S. alone. In countries such as Lesotho, The Gambia, and Liberia, remittances account for over 20% of their GDP.

At the same time, the U.S. is pulling back on foreign aid globally. In early 2025, the Trump-led Congress announced a near-total suspension of development assistance. CGD estimates that cuts to USAID alone could shrink Gross National Income (GNI) by more than 1% in 23 countries, including Somalia.

For countries already grappling with inflation, food insecurity, and political instability, the combination of taxed remittances and lost aid may be more than their economies can absorb.

A shift toward informal channels

Economists are also warning that the tax could drive migrants away from formal financial systems and into unregulated channels. A 2021 study by Ahmed et al. found that each 1% increase in remittance costs reduces the volume of formal transfers by 1.6%. Another survey by Western Union found that a 5% tax could reduce formal flows by 17.7% and increase informal transfers by more than 21%.

Migrants may respond by asking U.S. citizens to send money on their behalf, relying on hawala networks, using “paqueteros” (informal parcel delivery services), or turning to cryptocurrencies and digital wallets to avoid official scrutiny.

Somalis are no strangers to innovation in this space. From hawala systems to digital platforms like EVC Plus and WAAFI, the Somali diaspora has long relied on agile, low-cost channels to move money home—even during periods of civil war or financial isolation. However, this tax may strain those systems, especially for remittance operators who are already squeezed by compliance costs and thin profit margins.

Development economists argue that lowering remittance transaction costs—not taxing them—is the more effective approach. As of Q3 2024, migrants paid an average of 6.6% in transfer fees, more than double the 3% target set by the UN Sustainable Development Goals (SDGs).

Bringing costs down to 3% could help offset over 50% of aid losses in 13 low-income countries, including Somalia, according to CGD.

Other recommendations include matching grants to encourage the productive use of remittances, diaspora bonds to fund infrastructure projects, and seasonal work visas for residents of low-income countries to boost high-impact remittances.

Despite public backlash, the tax appears likely to move forward. Yet experts note that it won’t generate much revenue—just $10 billion over 10 years, or 0.1% of the federal budget—while potentially costing recipient countries $2.5 billion annually in lost flows and broader economic ripple effects.

For many Somali families who receive just $50 to $200 a month from relatives abroad, the new tax may represent a tipping point. That small sum often covers food, school fees, and medical care—and without it, the consequences could be dire.

“This could be the difference between getting by and going hungry,” one aid worker in Mogadishu said. “For many families, there’s just no cushion left.”

Washington D.C. – In a sweeping move to disrupt the financial lifelines of the Islamic State (ISIS) across Africa, the United States and six Gulf nations have jointly imposed sanctions on three individuals accused of bankrolling the group’s operations—including the longtime leader of its Somali branch. The coordinated action, unveiled Monday, marks a significant international effort to counter the militant group’s growing reach on the continent.

The sanctions were announced by the Terrorist Financing Targeting Center (TFTC), a coalition launched in 2017 that includes the U.S., Saudi Arabia, the United Arab Emirates, Qatar, Kuwait, Bahrain, and Oman. The TFTC’s mission centers on intelligence sharing, capacity building, and enforcing sanctions to choke off extremist funding.

At the heart of this latest round of designations is Abdiweli Mohamed Yusuf, identified as the head of ISIS-Somalia and the group’s chief financial officer since 2019. According to the U.S. Treasury, Yusuf has overseen the group’s fundraising operations, extracting millions of dollars through extortion schemes targeting businesses, livestock markets, imported goods, and agricultural activity—particularly in Puntland and the capital, Mogadishu.

In 2021 alone, ISIS-Somalia extorted approximately $2.5 million, with an additional $2 million raised in the first half of 2022. U.S. officials say the funds not only bankrolled ISIS activities inside Somalia but also fueled insurgencies in countries like Uganda, Mozambique, and the Democratic Republic of Congo (DRC).

“Today’s joint action underscores our shared commitment to disrupting the ability of ISIS and other terrorist groups to access the international financial system wherever they seek to operate,” said Bradley T. Smith, the acting U.S. Under Secretary for Terrorism and Financial Intelligence.

A key node in a global network

U.S. intelligence describes Yusuf as a central figure in ISIS-Somalia’s leadership, reporting directly to both Abdirahman Fahiye Isse Mohamud, the group’s current emir, and Abdiqadir Mu’min, the group’s founder who now heads the Al-Karrar Office—a regional command post responsible for financial and operational coordination across East and Central Africa.

Through this network, funds raised in Somalia are funneled through Al-Karrar and redistributed under ISIS’s General Directorate of Provinces (GDP) to affiliate groups throughout the region. The system has sustained militant operations in areas like Islamic State Central Africa Province (ISCAP) and Mozambique Province, both of which have launched high-profile attacks in recent years.

The sanctions freeze any U.S.-linked assets held by the individuals and prohibit American citizens and entities from conducting business with them. Notably, Yusuf had already been designated under Executive Order 13224 by the U.S. Treasury’s Office of Foreign Assets Control (OFAC) in July 2023, a measure targeting those providing material support to terrorist groups.

Two other individuals were sanctioned alongside Yusuf: Hamidah Nabagala, a financier based in the DRC, and Zayd Gangat, a facilitator and trainer operating out of South Africa.

Nabagala is accused of funding the October 2021 bombing in Kampala, Uganda, which left one person dead and at least three injured. U.S. officials also allege that she tried to send her children to ISIS training camps in eastern Congo and wired funds to an operative who was later arrested by Ugandan authorities. The attack in Kampala, claimed by ISCAP, underscored the rising danger posed by ISIS-aligned groups in East Africa.

Gangat, meanwhile, is believed to have been involved in ISIS recruitment and training in South Africa. He reportedly played a key role in raising funds through criminal enterprises, including armed robbery, extortion, and kidnapping-for-ransom. Counterterrorism officials increasingly view South Africa as a logistical and financial base for extremist groups operating across the continent.

Somalia’s ongoing battle

ISIS-Somalia remains active mainly in the Bari region of Puntland, where it has historically relied on extortion and targeted killings to finance its operations. While significantly smaller in size than its rival, the al-Qaeda-linked Al-Shabaab, ISIS-Somalia holds strategic importance in the eyes of U.S. officials, primarily due to its financial role in linking ISIS networks from Mozambique to the Sahel.

In response, Puntland authorities have escalated their military campaign against the group. Since late 2024, Puntland’s security forces have waged Operation Hilaac—meaning “Lightning”—a sustained offensive to dismantle ISIS strongholds in the rugged Cal Miskaad mountains. Now in its fourth phase, the operation has reportedly resulted in the deaths of dozens of militants and the recapture of major bases, including Buqa Caleed and Togga Miraale.

A particularly significant strike in June saw Puntland’s elite Dervish forces kill more than 35 fighters—among them foreign operatives—and seize weapons caches in the Miraale-Balade corridor, a strategic passage in northern Somalia.

Puntland President Said Abdullahi Deni has accused ISIS of draining millions from local communities through criminal rackets, warning that the group’s financial web poses a long-term threat to regional stability. The combination of local military pressure and targeted international sanctions is now seen as a critical strategy to cut off ISIS-Somalia’s access to resources and diminish its ability to coordinate across borders.

Mogadishu, Somalia – The Somali Federal Government has issued a strong rebuke against Puntland President Said Abdullahi Deni, accusing him of stoking unrest in the contested Sanaag region following deadly clashes in the Dhahar district on Tuesday.

The accusation comes at a time of growing tensions between Mogadishu and the semi-autonomous Puntland state — a standoff that threatens to derail joint efforts against extremist groups like Al-Shabaab and Islamic State while exposing the fragile and often volatile political alliances in northern Somalia.

In a sharply worded statement, Somalia’s Ministry of Interior, Federal Affairs and Reconciliation urged President Deni to halt actions that it said were “fueling conflict” and demanded the withdrawal of forces recently deployed from Qardho. According to the federal government, these troops were initially assigned to counterterrorism operations but have instead been redirected for “other unproductive purposes.”

The latest violence reportedly broke out in the northern part of Dhahar, near the town’s entry point, where local forces — identified by some as affiliated with the Maakhir faction — have established positions.

Maakhir, a self-declared entity within Sanaag, briefly operated independently between 2007 and 2009 before re-integrating with Puntland. However, its historical claims to autonomy and the continued presence of local armed groups make it a persistent factor in the area’s complex political mosaic — one often caught between Puntland and Somaliland’s competing territorial claims.

Efforts to de-escalate the situation in Dhahar appear to have failed. Gunfire was exchanged, reportedly leading to casualties, though the number of dead and wounded remains unclear. Residents described hearing intense shooting throughout the town, with military movements escalating and tension running high.

The federal government has called on local communities to remain calm and avoid any actions that might further destabilize the region. It also demanded the immediate release of a security officer allegedly detained in Dhahar, calling the arrest unlawful and unsupported by evidence.

This public condemnation from Mogadishu follows a similarly harsh statement issued earlier by Puntland authorities, who in turn accused the federal government of provoking the conflict in Dhahar and inciting instability in what they described as peaceful Puntland territory.

Puntland fires back

In its statement, Puntland claimed that armed militias organized by Mogadishu had triggered the Dhahar clashes, resulting in deaths. The Puntland government framed the incident as a betrayal of its ongoing counterterrorism campaign against ISIS and Al-Shabaab fighters in the Cal Madow and Calmidaad mountain ranges — regions where Puntland forces maintain a significant presence.

“This perverse act, which undermines the just struggle of the Puntland Government against international terrorism, will be held accountable by the Federal Government,” Puntland’s statement said.

The statement also accused Mogadishu of misusing international aid — intended for Somalia’s development and security — to arm militias and smuggle weapons into Puntland territory, further threatening the region’s stability. Puntland called on its citizens to remain united and safeguard regional cohesion.

Adding yet another dimension to the already tangled landscape is the ongoing conference in Las Anod — the capital of the Sool region — where leaders from SSC-Khatumo are working to formalize the establishment of their new regional state. The high-level talks, which began on Sunday, July 13, are being held under tight security and have drawn a federal delegation, including Interior Minister Ali Xoosh, alongside SSC-Khatumo leaders and traditional elders.

The goal of the conference is to lay the groundwork for a constitution and governance structure for SSC-Khatumo, a new federal member state officially recognized by the Somali government in early 2023. That recognition came after months of armed confrontation between unionist SSC forces and Somaliland troops.

SSC-Khatumo’s emergence marks a major political shift. It represents a successful push by unionist movements in the Sool, Sanaag, and Cayn (SSC) regions to affiliate with the federal government — directly challenging Somaliland’s long-standing territorial claims over those areas.

While welcomed by Mogadishu, SSC-Khatumo’s rise has strained relations with Puntland, which also claims parts of Sool and Sanaag based on clan lineage and historical ties.

The growing rift between the federal government and Puntland — now exacerbated by the ascendancy of SSC-Khatumo and the lingering presence of Maakhir-aligned forces — risks destabilizing a region critical to Somalia’s security and unity. Puntland, which declared itself an autonomous state in 1998, maintains its own government and security apparatus and has often operated with considerable independence from Mogadishu.

Tensions between the two sides have long simmered over disputes around power-sharing, federalism, and the distribution of resources — disputes now inflamed by shifting alliances and the contested future of Somalia’s northern regions.

DHAHAR, Somalia – Heavy fighting broke out on Tuesday in Dhahar, a strategic town in Somalia’s northern Sanaag region, between forces loyal to the semi-autonomous Puntland state and local militias affiliated with the nascent SSC-Khaatumo administration.

The clashes, which reportedly resulted in casualties, underscore escalating tensions over territorial claims in a region vital to the stability of northern Somalia.

The confrontation erupted in the upper reaches of Dhahar, near an entrance to the town where Maakhir militias had established a strong presence. Efforts to de-escalate the situation reportedly failed, leading to an intense exchange of gunfire that echoed across the city.

The exact number of casualties remains unconfirmed, but the situation in Dhahar is reported to be highly volatile, with significant troop movements observed.

Deepening regional divide

The fighting comes as Puntland intensifies its opposition to the inclusion of parts of Sanaag into the SSC-Khaatumo administration. This newly forming entity aims to govern the Sool, Sanaag, and Cayn (SSC) regions, which have long been disputed territories claimed by both Puntland and the self-declared Republic of Somaliland.

The current clashes coincide with a crucial conference in Lasc Anod, the capital of Sool, where efforts are underway to finalize the structure of the SSC-Khaatumo administration.

Puntland President Said Abdullahi Deni had previously issued a stern warning, holding responsible “anyone involved” in attempts to incorporate Sanaag into SSC-Khaatumo, explicitly citing the Somali Federal Government. This highlights the complex web of allegiances and rivalries that define Somalia’s fragmented political landscape.

The recent fighting follows significant progress at the Las Anod conference, which aims to establish a formal regional state for the SSC regions and northern Somalia. The conference, attended by traditional elders from SSC-Khaatumo and Maakhir, along with the leadership of the emerging administration, successfully formed a 15-member committee tasked with selecting delegates for the new government.

Of the 15 committee members, eight are drawn from the broader SSC regions, while seven represent Maakhir, indicating a concerted effort to integrate the Sanaag-based group into the new administrative framework. This move is seen as a direct challenge to Puntland’s longstanding claims over parts of Sanaag.

The Somali Federal Government has officially recognized SSC-Khaatumo, a stance that has further emboldened the group but drawn strong opposition from both Somaliland and Puntland. This federal backing is viewed by Mogadishu as a step towards strengthening national unity, particularly in regions where central authority has historically been weak.

Historical and political context

The Sanaag region, like Sool and Cayn, has been a flashpoint for decades due to overlapping claims by Puntland and Somaliland. Puntland, established in 1998, asserts its authority based on clan affiliations, while Somaliland, which declared independence from Somalia in 1991, claims the territory as part of its colonial-era borders.

The emergence of SSC-Khaatumo as a distinct political entity advocating for self-determination for the region’s inhabitants further complicates this intricate geopolitical dynamic.

The Maakhir administration, a local entity in Sanaag, has recently aligned itself with SSC-Khaatumo, a significant shift that has directly contributed to the current escalation. This alignment aims to establish a unified administration for the SSC regions, thereby challenging the existing territorial claims of both Puntland and Somaliland.

As SSC-Khaatumo moves closer to establishing a full-fledged administration with significant support from the federal government, the potential for further conflict in northern Somalia remains high. The outcome of the ongoing conference in Las Anod, as well as the reactions from Puntland and Somaliland, will be crucial in determining the future stability of these contested regions.