Kenya, Uganda and Tanzania presented their 2026/27 budgets to parliament on Thursday under unusual pressure, as investors watched closely to see how each government planned to absorb cost shocks from the Middle East conflict while holding debt to manageable levels.
The timing matters. East Africa is seen as highly susceptible to the impact of the war, given the region’s reliance on petroleum and fertiliser imports — a vulnerability that prompted the African Development Bank to cut its regional growth forecast for 2026 by half a percentage point.
The three budgets differ sharply in strategy. Kenya is focused on fiscal consolidation after years of missed targets. Uganda is positioning itself for a resource-led expansion anchored on oil. Tanzania is turning inward, pushing to fund more of its own development as foreign aid retreats.
Kenya: A KSh 4.8 Trillion Plan With a KSh 1.15 Trillion Gap
Treasury Cabinet Secretary John Mbadi tabled a KSh 4.8 trillion spending plan in the National Assembly on 11 June, projecting total revenue and grants of KSh 3.64 trillion against planned expenditure of KSh 4.8 trillion. The resulting deficit of KSh 1.146 trillion, roughly 5.5 percent of GDP, will be financed largely through domestic borrowing.
Mbadi set a path to reduce the deficit gradually to 3 percent of GDP by the 2028/29 financial year, but warned that the target carries significant downside risks.
“The outlook for 2026 has been revised downwards to 5 percent from the earlier projection of 5.3 percent, reflecting the adverse impact of the ongoing conflict in the Middle East on domestic economic activities,” he told parliament.
Beyond the external threat, the minister cited structural risks at home. “Domestically, climate-related shocks could disrupt agricultural production and infrastructure, while externally, geopolitical tensions, commodity price volatility, weaker global growth, and tighter financial conditions continue to adversely affect inflation, exports and capital flows,” he said.
The warning lands against a backdrop of sustained political pressure. Kenya has been rocked by deadly protests against fuel price increases, and the government has repeatedly underperformed on its own budget targets in recent years. Andrew Matheny, senior economist at Goldman Sachs, said investors would be looking for concrete evidence of a credible fiscal path — whether through spending cuts or realistic revenue measures — rather than projections alone.
An analysis of the proposed KSh 4.78 trillion budget shows that despite the National Treasury targeting a record KSh 1.1 trillion in domestic borrowing to plug the projected deficit, a substantial share of allocations will go towards recurrent expenditure. Recurrent expenditure is projected to fall from 17 percent of GDP in 2026/27 to 15.4 percent in 2027/28, before dropping further to 14.5 percent in 2028/29 — a trajectory that depends on sustained revenue growth and restraint on the wage bill.
Uganda: Oil Production Poised to Lift Growth to Double Digits
In Uganda, Finance Minister Henry Musasizi raised the total budget by 3.5 percent and told parliament the country was on course to return to double-digit economic growth for the first time since the 1990s.
“With commercial oil production commencing later this calendar year, growth is projected to accelerate to 10.2 percent,” Musasizi said.
The minister framed oil revenue as a multiplier for the broader economy. “A larger economy will create more jobs, raise household incomes, expand opportunities for business, and generate the resources required to invest in quality education, healthcare, infrastructure, security and other public services,” he said.
Uganda has long anticipated this moment. Uganda’s government has identified priority infrastructure investment including a fuel pipeline to support the export of crude oil, and its focus areas for growth span value addition in agriculture, tourism promotion, expansion of the mining sector, and technological advancement.
Tanzania: Fewer Donors, More Self-Reliance
Tanzania’s Finance Minister Mussa Omar took a different tone. Rather than projecting an external windfall, he acknowledged a structural shift in how the country must finance itself.
“This situation necessitates the need to accelerate our efforts toward self-reliance,” Omar told parliament, pointing to a drop in financing from wealthier foreign nations and rising debt service pressure as the drivers.
The government expects the economy to grow 6.3 percent in the current year, up from 5.9 percent in 2024/25. Tanzania’s budget stands out for its higher growth rate and strong development allocation. The government is prioritising transport corridors, energy systems, water infrastructure, and industrial development as part of its strategy to strengthen its position as a regional logistics and production hub. Daily News
Tanzania also sees an opportunity in the disruption caused by the Middle East conflict. Planning Minister Kitila Mkumbo told parliament that Dar es Salaam’s ports could benefit from rerouted shipping traffic. “There is an opportunity to provide services for the transhipment of ships that have not been able to deliver freight containers to ports in the Middle East,” he said.
Mkumbo went further, arguing that investor caution toward the Gulf could redirect capital toward East Africa. “This war gives us an opportunity for our country to attract investors who now see the Gulf region as no longer safe for their investment,” he said, citing gas production as one such area.
Budget Snapshot: Kenya, Uganda and Tanzania 2026/27
| Kenya | Uganda | Tanzania | |
|---|---|---|---|
| Total budget | KSh 4.78trn (~USD 37bn) | Shs 84.3trn (~USD 22.9bn) | Sh 62.334trn (~USD 24.2bn) |
| Budget change (year-on-year) | Slight increase | +3.5% | +10.3% |
| Fiscal deficit | ~5.5% of GDP | Not disclosed | Not disclosed |
| GDP growth forecast (2026) | 5.0% | 10.2% (oil-led) | 6.3% |
| Key risk | Debt, revenue shortfalls | Oil production delays | Foreign aid reduction |
| Key opportunity | Fiscal consolidation | Commercial oil production | Regional logistics hub |
Sources: National treasuries of Kenya, Uganda and Tanzania; African Development Bank; Goldman Sachs.
Economists say Tanzania is pursuing accelerated expansion through infrastructure investment, Kenya is focused on fiscal discipline and stabilisation, while Uganda is positioning itself for a future resource-led growth cycle anchored on oil and agriculture. Despite differing approaches, all three economies converge on a common challenge: how to finance growth sustainably in a constrained global environment. Daily News
That challenge is unlikely to ease soon. With Middle East tensions still driving up fuel costs and traditional donors pulling back, each country enters the 2026/27 financial year with a different set of bets — and a common need to prove they can deliver on them.
