Following several extensive negotiations and reconciliation efforts, Somalia marked a historic milestone with the formation of its first internationally recognized Transitional National Government in 2000, followed by the Transitional Federal Government in 2004. Somalia made another significant breakthrough in 2012 with the adoption of a provisional constitution, establishing a two-tier system of governance comprising the Federal Government and Federal Member States: Puntland, Jubaland, Southwest, Galmudug, and Hirshabelle. Since then, Somalia has made significant progress in creating federal institutions, particularly in fiscal federalism, through the establishment of intergovernmental platforms that reached important agreements and achieved critical milestones. However, advancing the fiscal federalism agenda remains challenging, with issues such as constitutional ambiguities, unclear functional and revenue-raising responsibilities, ineffective resource-sharing arrangements, and recurring intergovernmental disputes between the Federal Government and Member States.