East African finance chiefs face fiscal tightrope in budgets

East African finance ministers will be walking a tightrope when they reveal their spending plans on Thursday, with ballooning debt, underperforming revenue and geopolitics challenging planned fiscal consolidation.

Uganda, Rwanda, Kenya and Tanzania will present their budgets to lawmakers, as the region grapples with cuts in foreign aid and the turmoil unleashed by US President Donald Trump’s trade war.

Political and technical challenges have resulted in lower-than-expected tax yields in the region, according to Connor Vasey at London-based advisory firm J.S. Held. “Governments are caught between unpopular tax measures and persistent spending cuts, which fall disproportionately on development expenditure.”

To address these challenges, the four countries plan to increase spending by a combined $5 billion in the 12 months through June 2026, compared with the 2024-25 fiscal year, despite rising debt payments and limited room to lift taxes.

“It is impossible to craft a budget which pleases everyone, but in the region it is getting harder to draft one which pleases anyone,” Vasey said.

Here’s what to expect when the finance ministers present their budget statements.

Kenya

Treasury Secretary John Mbadi will present the nation’s budget a year after planned taxes on everything from bread to diapers sparked deadly protests in which at least 60 people died.

To avoid a repeat, Mbadi has been holding informal meetings with citizens to win support for his 4.24 trillion shillings ($32.8 billion) expenditure plan that includes the removal of tax breaks on mobile phones, pharmaceuticals and animal feed.

He plans to borrow 591.9 billion shillings locally and 284.2 billion shillings in net foreign loans to fund a shortfall on the budget that’s estimated at 4.5% of gross domestic product in 2025-26, from 5.1% forecast in the current fiscal year.

Mbadi may provide more details on plans to privatize state assets and a request for a fresh International Monetary Fund program after the nation scrapped a previous one, forgoing $850 million budget financing.

Tanzania

Tanzania’s Finance Minister Mwigulu Nchemba is targeting a fiscal deficit of 3.5% of GDP in 2025-26 from 3.4% forecast for this fiscal year and plans to hike spending by 13% to 57.04 trillion shillings ($22 billion) ahead of elections in October.

The “expansion signals the government’s commitment to tackling immediate fiscal pressures while advancing long-term national development objectives,” Shani Smit-Lengton, senior economist at Oxford Economics Africa, said in a research note.

Nchemba is expected to provide more details on the nation’s development projects and plans to attract investment to accelerate economic growth to 6% in 2025 from about 5.4% last year and ease the government’s borrowing burden.

Uganda

The budget of Africa’s biggest shipper of coffee is set to grow slightly to 72.4 trillion shillings ($20 billion) from the 72.1 trillion-shilling spending plan approved in 2024-25.

Uganda expects its finance gap to narrow to about 6.6% of GDP from 8% of GDP, amid improved revenue collection and faster growth. The economy is projected to expand 7% in the year through June 2026, compared with 6.3% seen in the current fiscal year.

It anticipates investment flows into its oil sector and planned spending of 2.2 trillion shillings for the construction of a railway, with similar amounts for roads and bridges to boost growth.

The expected resumption of access to World Bank loans that were previously frozen because of the nation’s harsh anti-LGBTQ laws could unlock foreign direct investment and aid to support the budget.

Rwanda

The government plans to lift spending by 21% to 7.03 trillion francs ($4.9 billion) to fund a new airport in Bugesera, southeast of Kigali, the capital, and RwandAir’s expansion. These capital heavy projects will add to Rwanda’s loan-repayment pressures and raise public debt to 86.7% of GDP in 2026, according to the IMF.

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