East Africa’s tax authorities find themselves under mounting pressure to finance expanded budgets for the 2026/2027 financial year, even as fiscal deficits widen due to falling revenue collections.

Yet, in the budget plans presented on Thursday, the region’s Finance ministers are seeking to raise more revenues locally as external funding sources shrink.

Tanzania, for instance, has an ambitious plan to raise 75 percent of its budget domestically, piling pressure on the taxman to plug the envisaged hole blamed on a decline in external support, owing to lingering concerns over the country’s civil rights record around the conduct of the October 2025 General Election.

In Uganda, where the debt stock has risen drastically over the past decade, reaching Ush130 trillion ($34.6 billion) by January 2026, according to the Bank of Uganda, the 2026/27 financial year debt servicing is projected to consume Ush33.4 trillion ($8.89 billion) —nearly 40 percent of the national budget—making it the single largest expenditure item. The Yoweri Museveni administration is betting big on oil revenues to drive the economy.

Key development pillars and economic transformation will take the lion’s share at $3.42 billion, closely followed by social transformation and transformational governance at $1.14 billion and $776 million respectively.

Meanwhile, Kenya is looking at various tax concessions granted by the East African Community (EAC) member states to save on revenues and stimulate economic growth in the wake of a record Ksh4.82 trillion ($37.36 billion) spending plan, whose funding prospects are shrouded in uncertainty as a result of shrinking fiscal space and the citizens’ pushback against further tax increases.

National Treasury Cabinet Secretary John Mbadi, while presenting the 2026/2027 budget, promised to avoid new taxes and further increases to cushion households and businesses reeling under the weight of heavy taxation and high cost of living.“I have deliberately chosen not to introduce new taxes or increase tax rates that would further overburden the hardworking Kenyans,” Mr Mbadi said.“Instead, the measures are focused on reforms that improve efficiency in tax collection, create fairness in the tax system and broaden the revenue base without burdening the mwananchi.”This year’s budget comes against a backdrop of falling revenue collections, mounting debt servicing costs, renewed inflation and interest rate pressures and the US-Israel war on Iran which has disrupted global supply chains and shaken international financial markets.

Mr Mbadi said the EAC member states have agreed on a set of customs taxation measures aimed at supporting Kenya’s local manufacturing, promoting value addition and strengthening industrial competitiveness. These measures also seek to enhance Kenya’s food security, protect jobs and align the regional tariff structure with Kenya’s economic objectives.

Kenya has been allowed to continue importing wheat at a duty remission rate of 10 percent instead of the Common External Tariff rate of 35 percent to support affordability of food and animal feeds by Kenyans. Kenya will also continue importing inputs for manufacture of animal feeds duty-free under the EAC duty remission scheme and apply a zero percent import duty on dates during Ramadhan in 2027.

Kenya also secured approval to continue applying an import duty of 35 percent or $200 per tonne, whichever is higher, on imported rice instead of the CET rate of 75 percent or $345 per tonne.“Kenya also secured approval to continue applying a duty remission rate of 10 percent on selected inputs used in furniture and door manufacturing, as well as completely knocked down kits for assembly of motorcycles,” said Mr Mbadi.“Through these measures, jobs created by the industries in these categories remain protected to support livelihood of our people.”To promote value addition of products locally grown by farmers, Kenya was allowed a stay of application of EAC-CET rates and apply a duty rate of 35 percent or equivalent specific duty rates on selected processed food products including preserved vegetables, peas, sweet corn, tomato products, sauces, jams, edible oils and malt extract.

The EAC Finance ministers also approved Kenya’s request for an extension of a stay of application of EAC-CET and apply higher duty rates ranging between 25 percent and 35 percent on imported textiles, apparel, blankets, bed linen, carpets, tarpaulins, leather products, and worn clothing, while maintaining zero percent duty remission on selected inputs for leather processing.

The move aims at protecting local manufacturers in the textile, apparel, leather, and footwear sectors.

Kenya also requested and was granted a zero percent duty remission on inputs used in the assembly of smartphones, laptops, and tablets.

Additionally, optical fibre cables and recorded software products will be imported at a higher tariff rate of 10 percent instead of the EAC-CET rate of zero percent.“Expanding access to affordable smart telecommunication devices will enable more Kenyans participate in the digital economy and benefit from emerging opportunities in business and innovation,” Mbadi said.

Kenya was granted a zero percent duty remission on selected inputs used in the local assembly of motor vehicles to protect these industries and create jobs for Kenyans.

And to support local manufacturing of paper and paper products, Kenya was allowed to continue applying stays of application at a rate of 35 percent on kraft paper and paperboard, printed poly bags, sacks and bags, and related packaging materials instead of the EAC CET rate of 25 percent.

Other tax concessions granted to Kenya by the EAC member states included a zero percent duty remission on selected inputs for the manufacture of roofing materials and related industrial products.

Kenya was also allowed to continue applying stays of application at duty rates ranging from 25 percent to 35 percent, together with equivalent specific duty rates where applicable to discourage under declaration of import values.

Mbadi said because of the limited fiscal space, Kenya continues to explore alternative financing models particularly the Public Private Partnerships (PPPs) arrangements in developing infrastructure projects.

With this in mind, Kenya negotiated and was granted a stay of application of EAC-CET and apply a zero percent import duty on goods, materials, and equipment imported for use in the PPP projects.

Kenya was also granted extension of the stays of application of EAC CET rates and apply rates ranging from 25 percent to 35 percent, together with equivalent specific duty rates where applicable, on products including LPG stoves, cookware, aluminium products, steel products, electrical equipment, and related manufactured goods.

This is aimed at protecting local manufacturers of household and industrial products and the jobs.

Under the region’s revised four-band CET which took effect on July 1, 2022, imports of finished products from countries outside the bloc attract a duty of 35 percent duty; 25 percent for intermediate products available in the EAC region; 10 percent for intermediate products not available in the EAC region and 0 percent import duty on raw materials and capital goods attract.

Kenya’s total spending plan for the 2026/2027 fiscal year is projected at Ksh4.82 trillion ($37.36 billion), of which recurrent and development expenditures are projected at Ksh3.56 trillion ($27.59 billion) and Ksh750 billion ($5.81 billion) respectively.

Kenya faces the resultant fiscal deficit, including grants, of Ksh 1.14 trillion ($8.83 billion) which will be financed through net external borrowing of Ksh 116.2 billion ($900.77 million) and net domestic borrowing of Ksh1.03 trillion ($7.98 billion).

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