East African Community partner states seem reluctant to adopt policies meant to raise domestic revenues even as they face pressure to address mounting fiscal obligations.

 

And experts warn that there is a risk of diluting the market in the EAC as a universal environment conducive for doing business, weakening the real goals of integration.

These scanty economic integration gains are reflected in Uganda’s latest budgetary proposals, pointing to sluggish harmonisation of policies in the East African Community (EAC). It could also pose a setback to investors eager to reap the benefits of the convergence of economic and financial policies among member states.

A close look at the 2025/26 budget blueprint reveals a burning hunger for extra tax monies required to clear surging public debt obligations, financing of pending infrastructure projects, and poverty alleviation programmes across the region.

For instance, an import declaration fee of one percent based on the customs value of taxable goods under the EAC Common External Tariff (CET) will be applied on all imports entering Uganda’s borders with effect from July 1, 2025; a tax measure similar to customs levies imposed by other EAC countries to date.

New tax measures in Uganda are projected to generate Ush538.6 billion ($149.5 million) for the treasury during the financial year 2025/26. Kenya’s Treasury expects to raise Ksh25 billion ($191.9 million)-Ksh30 billion ($230 million) from new tax measures during the financial year 2025/26, according to latest government data.

Yet Uganda’s decision to offer a three-year tax exemption to domestic startups owned by local citizens that bear an investment of less than Ush500 million ($138,828) could reflect the government’s determination to attract higher inflows of venture capital in a business environment previously deemed hostile.

“The EAC’s financial strain – evident in recent internal borrowing due to delayed contributions – further hampers progress. Without stronger fiscal coordination and timely funding, the path to monetary union remains uncertain,” noted Shani-Smit Langton, a senior economist at Oxford Eco

Historically, it added, Kenya has struggled to meet revenue collection targets and has often exceeded its spending limits.“Although enhanced tax enforcement is much needed, it is unlikely to deliver immediate results. Moreover, the decision to avoid broad-based tax increases may help mitigate political turmoil but increases the likelihood of relying on other measures, such as targeted taxes on foreign firms or taxing the wealthy,” the brief added.

Latest budget proposals presented by the region’s finance ministers this week did not offer clues on harmonisation of critical domestic tax rates that include Value Added Tax (VAT), Excise duty rates, stamp duties and withholding tax rates- a major source of competition headaches faced by businesses selling goods across the region’s borders.

Provision of an interest-free credit facility for Ugandan commercial farmers- a strategic tool for the mitigation of future food security risks tied to negative climate conditions was similarly missing in other EAC member states’ budget proposals. The government has allocated Ush175 billion ($48.5 million) to this credit facility for the financial year 2025/26, though its operations kicked off before budget day.

On the other hand, biting macroeconomic blues confronting most of the EAC member states- a key driver of spending cuts targeted at some sectors and increased tax mobilisation pressures are widely mirrored by Kenya’s economic woes.

Failure to harmonise key economic and financial policies across EAC member states poses a threat to the bloc’s business competitiveness, experts indicated.

Uganda’s overall budget envelope for the financial year 2025/26 stands at Ush72.3 trillion ($20 billion) while domestic resources are estimated at Ush37.55 trillion ($10.4 billion). The latter comprises tax revenues amounting to Ush33.94 trillion ($9.4 billion) and non-tax revenues estimated at Ush3.28 trillion ($910.7 million). Domestic borrowing is estimated at Ush11.38 trillion ($3.1 billion) for the financial year 2025/26 according to the latest budget proposals.“You need to achieve political integration first before you can attain effective monetary and financial integration. The old approach of pursuing a customs union followed by a common market and monetary plus financial integration is not very reliable in the regional harmonisation context.“For example, the signing of the EAC customs union protocols in 2005 was supposed to be followed by harmonisation of different laws meant to facilitate easy movement of goods and labour, but this has not been fully implemented,” explained Derrick Nkajja, CEO of Institute of Certified Public Accountants of Uganda.

Matia Kasaija, Uganda’s Finance Minister, said during the budget speech that the economic fundamentals -- growth, employment, inflation, and exchange rates -- are in good shape. The increase in GDP represents a larger demand for intermediate goods and services. This will also help the government increase tax revenues over time.

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