Finance ministers in Kenya, Uganda and Tanzania unveiled their 2026/27 budgets on Thursday under pressure to protect their economies from rising fuel costs linked to the Iran conflict while containing growing debt burdens and fiscal deficits.
The spending plans come as East African economies face mounting risks from higher oil prices, which have raised import costs, threatened growth and fuelled concerns about inflation across the region.
East Africa is particularly vulnerable to external shocks because of its dependence on imported petroleum products and fertilisers. The African Development Bank recently cut its growth forecast for the region this year, citing the impact of the Middle East conflict and rising commodity prices.
Investors were closely watching Kenya, the region’s largest economy, for signs that the government can place public finances on a more sustainable path while maintaining economic growth.
Finance Minister John Mbadi faced the challenge of balancing heavy debt repayments, slowing economic activity and public demands for relief from rising living costs.
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The Treasury earlier projected a budget deficit of 5.4 percent of gross domestic product in the fiscal year beginning in July, compared with an estimated 6.4 percent this financial year.
“Treasury has consistently underperformed budget targets in recent years and the fiscal balance has remained in a primary deficit, insufficient to stabilise public debt and restore market confidence,” said Andrew Matheny, a senior economist at Goldman Sachs.
He said investors would be looking for evidence of a more credible fiscal strategy, including spending restraint or revenue measures capable of narrowing the deficit.
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President William Ruto, who is seeking re-election next year, has defended his government’s economic record, saying reforms introduced during his first term helped avert a debt crisis and stabilise public finances.
His administration has intensified tax collection efforts in a bid to raise revenue, but businesses and households have complained that the measures have increased economic hardship, while some state institutions report delays in receiving budget allocations.
Public frustration over the cost of living has triggered protests in recent months, highlighting the political sensitivity of fuel prices and taxation ahead of next year’s election.
In neighbouring Uganda, economists warned that prolonged increases in oil prices could complicate government spending plans and place fresh pressure on the local currency.
“We should not assume a back-to-normal trend, so it’s important that we have a shock mitigation measure,” said Enock Nyorekwa Twinoburyo, an economics lecturer at Makerere University.
He said higher oil prices were increasing demand for foreign currency to pay for imports, creating exchange-rate pressures that could feed inflation and raise the cost of government borrowing.
Uganda is expected to maintain a focus on fiscal discipline while preparing for future oil production projects that authorities hope will transform the economy and boost state revenues.
Tanzania, which has enjoyed relatively robust growth in recent years, is also expected to prioritise development spending while seeking to shield households and businesses from higher import costs.
Analysts said the budgets would offer an important indication of how East African governments intend to navigate an increasingly uncertain global environment marked by geopolitical tensions, volatile energy markets and tighter financing conditions.
For investors, the central question is whether governments can sustain economic growth while reducing deficits and keeping debt levels under control as external shocks continue to weigh on the region’s outlook.
