Non-governmental organisations are warning of a financial crisis in Somalia after banks in the United States halted money transfers to the country ravaged by decades of instability.

The NGOs said Somalis living in the US are unable to send money back home after the ban, threatening the financial lifeline of many locals.

The banks in the US have broken ties with money transfer operators in the country and the civil society is expected to release a report on Thursday on the impending financial crisis.

“Over 40 per cent of people living in Somalia rely on remittances to meet their basic daily needs, nearly three million Somalis risk going hungry this year, families will not be able to afford health care, and a generation of children could be kept out of school,” Oxfam Somalia Country Director Enzo Vecchio said.

UK based Barclays Bank was the first to close its accounts with Somali money transfer operators last year.

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Two weeks ago, US’s Merchant Bank, which was responsible for transferring an estimated 60 to 80 per cent of remittances to Somali, followed suit.

And now Australia’s Westpac Bank has announced that it would soon close remittance accounts in the war-torn country.

Another Somali based NGO boss Mr Degan Ali said annual remittances to the country dwarf the yearly humanitarian aid, development aid and foreign direct investment budgets for Somalia combined.

The yet to be released report by NGOs claims that annual remittances represent 25 to 45 per cent of Somalia’s GDP.