As finance ministers across East Africa jointly presented their budgets for the 2026/27 fiscal year, the Kenyan government expressed its commitment to gradually reducing its fiscal deficit. However, Kenya’s Finance Minister, John Mbadi, warned that the global geopolitical crisis triggered by the conflict between Iran and Israel could severely disrupt the country’s economic recovery and its plans to keep national debt in check.
Because the East African region is highly reliant on fuel and fertilizer imports, it is exceptionally vulnerable to trade disruptions arising from the Middle East conflict. These pressing concerns have already prompted the African Development Bank (AfDB) to cut the region’s economic growth forecast for this year by half a percentage point.
According to Finance Minister John Mbadi, the economic growth forecast for 2026—which was previously projected at 5.3%—has been revised downward to 5% due to the adverse impact of the ongoing conflict in the Middle East on domestic economic activities.
The minister set the country’s budget deficit at 5.5% for this fiscal year, with plans to reduce it gradually to 3% by the 2028/29 financial year. However, he did not hide the fact that achieving this goal faces significant challenges ahead.
“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”John Mbadi, Kenya’s Finance Minister
As the largest economy in the region, Kenya has recently been rocked by deadly protests sparked by high fuel prices and the rising cost of living. Andrew Matheny, a senior economist at Goldman Sachs, noted that because the Kenyan government has underperformed its budget targets in recent years, it must now demonstrate a credible fiscal path through concrete actions, such as spending cuts or realistic revenue-raising measures.
While Kenya operates under fiscal anxiety due to the war, its neighbors, Uganda and Tanzania, are viewing the geopolitical situation through a different lens. In neighboring Uganda, Finance Minister Henry Musasizi raised the total budget by 3.5% and announced that the country is set to achieve double-digit economic growth for the first time since the 1990s.
With commercial oil production scheduled to commence later this calendar year, Uganda’s economic growth is projected to accelerate to 10.2%. This boom is expected to create more jobs, raise household incomes, and generate the necessary resources to invest in healthcare, education, and public infrastructure.
Meanwhile, Tanzanian Finance Minister Mussa Omar stated that because financing from wealthier foreign nations is dropping and debt pressure is rising, his government will focus heavily on boosting domestic revenue collection. This tightening situation necessitates that Tanzania accelerate its efforts toward economic self-reliance.
The Tanzanian government expects its economy to grow at a faster rate of 6.3% this year, up from 5.9% last year. Planning Minister Kitila Mkumbo told parliament that the Middle East war could actually present unique business opportunities for Tanzania.
Due to the conflict, ships that are unable to deliver freight containers to ports in the Middle East could turn to Tanzania for transhipment and port services. Furthermore, the minister explained that the war offers Tanzania an opportunity to attract investors who no longer view the Gulf region as safe, steering their capital into secure sectors like Tanzanian gas production.
