Averting heavy taxation in EAC with lessons from past bloody tax protests: A 2025/26 Pre Budget Analysis brief
Authors: Moses Kulaba, Governance and Economic Policy Centre
This analysis focuses on assessing the 2025/26 prebudget proposals with a view of determining the extent to which the governments in East Africa have learnt from the previous chaotic budgeting experiences that were marred with blood and deadly citizens protests. Based on the government budget framework papers already presented before parliament, the analysis highlights potential controversial areas that have remained perpetual features in our budgeting and may be of concern in 2025/26 budget proposals and the future.
Budgeting across East Africa has generally been at a center of controversy and criticism for being insensitive to the pressing economic concerns of citizens. Every budget is viewed as a litany of taxes imposed on poor citizens to finance every expanding government bureaucracy. Moreover, with aid cuts to vital sectors such as agriculture and health by the US government, it is likely that East African governments will continue to pursue aggressive tax measures to cover the gaps. Lessons from the past budget cycles have showed that this obsession to taxing of limited sources to finance a bludgeoning public sector, amidst rising unemployment and costs of living can be counterproductive.
The 2024/2025 budgets faced a lot of concerns and resistance over heavy taxation. In Uganda there were protests by small scale traders over VAT while in Kenya there was a violently bloody and deadly uprising by the youth under the umbrella of the Gen-Z. The protests forced the Ugandan government to negotiate with the traders while in Kenya the finance bill was withdrawn after a bloody confrontation between the youth protestors and security that left many injured and dozens killed.
The Kenyan government however re-introduced some of the controversial sections of the finance bill such as the controversial housing levy and it was likely that these will remain a permanent feature in the forthcoming budgets as the government pushed on with its ambition to deliver on low-cost housing. In South Sudan the budget was not passed and the country’s economic fundamentals remained hanging on a balance in a country already affected with civil war.
As governments embark on to the next budget cycle, it is important to look back and see what lessons have been learnt. We make this assessment based on the proposed budget estimates and tax measures for 2026/2027, with a firm recommendation that lessons must be learnt and mistakes avoided.
Overview of priority sectors and proposed tax measures in EAC countries for 2025/26
Tanzania
Based on the government statements presented before parliament early this year, Tanzania’s budget ceiling for the 2025/2026 financial year was planned to increase to 57.040trn/-, with the government planning to allocate 19.471trn/-, or 34.1 percent of total estimates, for development expenditure.
According to the finance minister Dr Mwigulu Nchemba the proposal represented a significant increase from the 15.959trn/- or 31.7 percent of the 50.291trn/- allocated for fiscal 2024/2025.
Out of the development budget funds 13.320trn/- will be mobilised from domestic sources, while 6.150trn/- will be sourced externally. The government further intends to enhance private sector participation in financing development projects via public-private partnerships (PPP)
The minister cited that government’s priority expenditure areas were servicing the government debt, public service salaries, strengthening peace, stability and security, as well as preparations for the 2027 continental soccer tournament.
The budget is expected to be financed through revenues amounting to 40.9trn/- and loans from domestic and external sources totaling 16.07 trn/-. The revenues from taxes were projected at 31.8trn/-, non-tax revenues of 6.2trn/-, local government revenues of 1.6trn/- along with bilateral and multilateral grants of 1.24trn/-.
Domestic revenues are expected to cover 69.7 percent of the entire 2025/26 budget as part of the government’s strategy to reduce dependence on unpredictable or high-cost and conditional sources,” the minister stated. Expected loans include 6.2trn/- from domestic sources and 9.79 trn/- from external sources.
From these estimates, the government plan to raise and spend an increased budget, with almost ¾ of its budget raised from domestic sources. This is quite commendable. However, it still not clear as to where the final tax burden will fall so as to raise such an amount without exerting further pressure on the ordinary low-income citizens.
Moreover, it is not evident yet the extent to which the projected budget has factored in the forecast global economic slowdown due to Trump’s tariffs and uncertainty of global trade and investment. Further, the scheduled General elections later in 2025 could equally have a dampening effect on Tanzania’s economic growth for 2025 as potential investors keep a ‘wait and see’ stance holding back major investment decisions until 2026.
Large strategic projects such as the LNG are yet to kick off and this is holding back significant foreign direct Investment and anticipated revenue inflows into Tanzania’s economy. The country’s debt portfolio has been rising and this could eat up a significant share of the increased budget and thereby undermining its anticipated social-economic outcomes.
Kenya
Kenya plans to spend an expected budget of Ksh 4.23 trillion in 2025/2026 financial year compared to 3.99Trillion that was planned for 2024/25. Out of this an estimated Ksh 2.49 trillion will be allocated to the National Government (The Executive, Parliament and Judiciary), Ksh1.36 trillion will be allocated to the consolidated fund and Khs405bln allocated to the Counties as per the equitable County share framework.
The government expects to raise Ksh.3trln in revenues with grants contributing Ksh46.9bln leaving a deficit of Ksh876bln to be covered through borrowing. The income taxes will account for Ksh1.28 trillion, VAT will generate Ksh772bln, import duties will contribute Ksh3bln, excise duties bringing in Ksh335bln, other taxes will generate Ksh202bln and 560bln collected from appropriations in aid (which includes fees and levies)
Out this Ksh1.1trillion will be spent on debt servicing with about Ksh851bln spent on domestic debt and Ksh246blin spent on foreign debt. Even with the current plan, Kenya still faces a deficit of Ksh876bln which will be covered with Ksh284.2bln (32%) from net foreign sources and 591.9bln (68%) from net domestic borrowing.
Almost all income taxes collected for 2025/26 will be spent on paying interests on debts. The public debt has been increasing with domestic debt projected at 5.1trln by end of May and the foreign debt at Ksh5trln by end of December.
The experience for last bloody tax riots has influenced Kenya’s 2025/26 budgeting process to an extent. With last year’s hindsight Kenya increased public participation, including conducting of extensive consultations across the counties and town hall meetings in major cities such as Kisumu, Nakuru, Nairobi and Mombasa. Special interest group meetings with the private sector, civil society, the youth and digital content creators.
Based on the views collected from the public participation meetings and world bank projections, the Kenyan government addressed issues around fiscal consolidation with realistic tax basing and economic growth projections. For example, the government revised its GDP targets downwards.
In terms of expenditures, the Kenyan government was modest and alert to the realties and lessons last year’s tax protests. The government has revised its budget projections, revenue collection targets and made some cuts to expenditures allocated to various ministries and departments. For example, allocation to parliament was reduced from Ksh42.5blnin 2024/25 to Ksh42.4bln in 2025/26 financial year.
The government is verifying and paying off all valid pending bills, plans to making appropriate expenditures, improving quality of procurement, saving unnecessary expenses of about 10-18% of the procurement budget which can support expenses elsewhere.
Despite these measures, Kenya’s budget still faces extreme pressures which may overshadow its performance. According to the Cabinet Secretary for Treasury, Mr John Mbadi, Kenya’s economy is not performing very well. The economy is yet to recover from the aftershocks of COVID 19 and the violent tax protests in 2023 and 2024. The Kenya Revenue Authority has persistently missed on its tax collections and the government has resorted to using supplementary budgets to cover the budget funding gaps.
The IMF and world bank further warn that Kenya is among the African countries with a high risk of defaulting on its debt due to revenue under performance and constrained fiscal gap[1]. Moreover, in August 2024, the global credit ratings agency Standard & Poor’s downgraded Kenya’s long-term sovereign credit rating to B- from B due to weaker fiscal consolidation and increasing public debt.
While this rating was revised in early 2025 from negative to positive, the rating is still below its previous B position and Kenya is still in the junk category with Caa1 rating[2]. This means that any future borrowing will still be expensive for Kenya to pay.
Funding of political offices still consumes a large percentage of Kenya’s budget to the extent that Okoa Uchumi civil society network, has described the Budget as ‘Budgeting for political survival’ Okoa notes that political offices such as the Presidential advisors received a large increase in budget allocation compared to essential services such as education.
A good budget is one which leaves enough money for people, prioritise expenditures on social-economic sectors such as agriculture, education and devolved services, be balanced with reduced over expenditure on financing debt.
Uganda
Uganda’s Parliament approved a 72.4 trillion-shilling national budget estimates for the 2025/2026 financial year, with a strong focus on financing economic growth and infrastructure development. This represents a modest increase from Ush 72.1 Trln passed last financial year.
According to government, the budget was aligned to the National Development Plan IV blue print, which aims at increasing household incomes, strengthening Uganda’s economy through agriculture and industrialization. The priority expenditures include financing of the Parish Development Model (PDM), Emyooga and construction of the Standard Gauge Railway as part of government’s transport infrastructure plans.
According to the National Development Plan IV, it aims at increasing household income, full mobilization of Uganda’s economy through agriculture and more among others. Within the proposed budget, it contains budget priorities such as the PDM and Emyooga. For this purpose, parliament approved 1.03 trillion for PDM and 100 billion for Emyooga; 3 billion has been earmarked for Juakali (Artisanal sector) A further 414 billion was approved as capitalization for the Uganda Development Bank to help grow local businesses.
Despite this increments, Uganda’s budgeting has increasingly become a budget for paying debts. Within the approved budget estimates also contains domestic debt arrears that seem to be crippling down the economy, that stand at Ush 13.8 trillion as per the last Auditor General’s report. A balance of Ush. 5.2 trillion is also included and with a deduction of 1.4 trillion embedded in the new budget, the remaining amount is payable within the next 3 years. Over the last years, payment to national debt consumes almost half of Uganda’s national budget.
Consistently lawmakers have called for accountability in government spending, combating of corruption and nugatory expenditures unaccounted such as the 774 billion shillings allocated to the Lubowa Hospital project. This stalled project has become an expensive cost center for years, with recorded cost over runs under minimum oversight.
Moreover, classified expenditures on security and financing the increasing local government structures have become permanent futures in the national budget, diverting a significant amount of funds away from development expenditure.
The taxman is yet to show where the resources will come from, however, it is anticipated that the perennial sources such as VAT, Excise duties etc. will remain the major victims of taxation. This approach to taxation has its own risks as earlier indicated of rising costs of living and worsening the economic conditions of ordinary citizens.
Moreover, with the US Trump tariffs, Uganda will experience some disruptions in its trade and forex flows, given that agricultural crops such as coffee are among Uganda’s exports to the US and among its leading foreign exchange earners.
Rwanda’s budget proposals 2025/26
According to Rwanda’s presented Budget Framework Paper (BFP) the government planned to allocate Frw 7,032.5 billion for the 2025/26 fiscal year, representing a 21% increase from the Frw 5,816.4 billion approved in the revised budget of FY 2024/25[1].
This increase mainly reflected the desire to increasing expenditure on strategic investments in projects such as the New Kigali International Airport construction, located in Bugesera, and RwandAir expansion, as well as ongoing recovery efforts from crises, including COVID-19, inflation, the May 2023 floods, and the Marburg disease outbreak.
The projected total resources for the 2025/26 fiscal year, comprised of domestic revenues of Frw 4,105.2 billion—of which Frw 3,628.0 billion was from tax revenue and Frw 477.2 billion from other revenues—external grants estimated at Frw 585.2 billion and external loans amounting to Frw 2,151.9 billion.
On the expenditure side, the budget was projected at Frw 7,032.5 billion, including Frw 4,395.1 billion for recurrent spending, including salaries, while Frw 2,637.4 billion would be allocated to capital spending.
Guided by national economic policies over the medium term, the budget for fiscal year 2025/26 will align with the medium-term fiscal consolidation path, supporting the implementation of the National Strategy for Transformation (NST2) goals while maintaining public debt at sustainable levels.
Under NST2, the 2025/26 national budget will prioritise: increasing crop and livestock productivity, promoting private investment, job creation and exports, accelerating industrialisation with a focus on manufacturing, promoting sports and creative arts, expanding generation and access to electricity, scaling up access to water, sanitation and decent housing.
The government plans to strengthen its transport system, leverage ICT and innovation to improve service delivery, deepen financial inclusion and enhance resilience to climate change through mitigation and adaptation.
According to the Ministry of finance, Rwanda’s economy has remained resilient despite various setbacks, posting a robust growth rate of 8.9% in 2024, exceeding the previously projected 8.3%. This growth was driven by strong performances in the services and industry sectors and increased food crop production.
Based on its fundamentals, Rwanda expects a strong economic out turn in the midterm, despite a challenging environment caused by climate change effects, global inflation, geopolitical tensions, trade wars, among other factors. The government planned to maintain macroeconomic stability and fostering inclusive growth by investing in key areas such as agriculture, manufacturing, healthcare, social protection, and education.
Like its other EAC member states the government was yet to pinpoint where the exact tax pinch points would be placed and who shoulders the largest tax burdened would be placed. Rwanda has traditionally generated revenues from income taxes such as VAT and Corporate taxes. It is anticipated that with the current economic forecasts; Rwanda’s tax base will remain relatively the same.
Moreover, Rwanda faces potential disruptions caused by the ongoing conflicts in eastern DRC, targeted sanctions over alleged support for the M23 rebels, contractions caused by the US Tariffs and an erratic climatic condition affecting Rwanda’s agricultural sector and its coffee export products. All these will exert pressures on the economy and likely influence the final budget out turn.
South Sudan
The latest budget for South Sudan, as approved by parliament in November 2024, is estimated to be 4.2 trillion South Sudanese Pounds (SSP). This budget includes a significant fiscal deficit of 1.9 trillion SSP, which is approximately 45% of the proposed expenditure. The budget for 2024/25 approval was delayed and faced concerns regarding a fiscal deficit of 1.9 trillion SSP, which is 45% of the proposed expenditure[2].
This budget approval followed a significant delay, as South Sudan’s previous fiscal year ended on June 30, 2024. According to the November 2024 IMF debt sustainability analysis, South Sudan’s overall and external debt remains sustainable but with a high risk of debt distress. The present value of public debt to GDP was estimated at 38.3% in 2023/24 and projected to reach 48.6%[3].
Over the past years South Sudan has faced significant budgeting challenges which include maintaining a stable macro-economic performance, raising of stable revenues and passing of the national budgets through its legislative organs.
The world bank reported that between July 2024 and January 2025, the gross revenue collection increased by 107.48 % from SSP 187.42 billion to SSP 388.86 billion compared the same period in the FY2023- 2024. It however noted that despite this performance, this outcome was 52.73% below the estimated target of SSP 559.5 billion (an average of SSP 94 billion monthly).
The key tax types contributing to these revenues were Personal Income tax (39.30%), customs taxes and duties (27.87), business profit tax (7.26%) and excise taxes (5.81%). The World Bank urged Swift and Sustained Reforms to Accelerate Economic Recovery and Inclusive Growth[4]
In its 7th Edition of South Sudan Economic Monitor (SSEM) titled “A Pathway to Overcome the Crisis” released in March the World Bank assessed that South Sudan’s economy was projected to contract by 30 percent in FY24/25, but with a projected rebound in FY25/26, if there was a resumption in oil exports of the country’s Dar Blend Oil. The SSEM further noted that South Sudan’s economy had declined for five consecutive years and projected that Gross Domestic Product (GDP) per capita was estimated to decline to around half of FY20 levels.
The report indicated that the projected contraction was primarily due to the disruption of oil production which had led to a significant decline in export revenues, estimated at $7 million per day. This had strained public finances, contributing to salary arrears and reduced spending on essential services like health and education.
The world bank further reported that South Sudan’s socio-economic outcomes have worsened over the past decade due to recurrent conflicts, fragility, and macroeconomic mismanagement compounded by global economic and climate shocks. Even before the oil shock of early 2024, per capita gross domestic product had dropped by 18 percent relative to its 2015 level, with prices rising 93-fold over this period. The erosion in living standards has left three in four people in poverty as of 2022.
Additionally, hyperinflation and widespread food insecurity affect nearly 80 percent of the population, while poverty was calculated to have risen to 92 percent based on available data. Weak governance, poor management of oil revenues, and ineffective fiscal policies had contributed substantially to these issues. Furthermore, the underdeveloped financial sector limited economic diversification and access to credit.
Without addressing these significant political and governance challenges, South Sudan’s budgeting exercise would largely remain theoretically on paper, with minimum trickle-down effects to its development ambitions and tangible benefits felt by the citizens.
Budget Trends of Select EAC Countries 2023/24-2025/26
Country |
2023/24 |
2024/25 |
2025/26 |
Kenya |
Ksh3.7trln |
Ksh 4.0Trln |
Ksh 4.23 trln |
Tanzania |
Tsh44.3Trln |
Tsh49.3Trln |
Tsh 57.0trln |
Uganda |
Ush52 Trln |
Ush72.1trln |
Ush72.4trln |
Rwanda |
Frw5.0Bln |
Frw 5,8 bln |
Frw 7,032bln |
Burundi |
BIF3.9Bln |
BIF 4.4trln |
BIF5.2Trln |
South Sudan |
SSP 2.1Trln |
SSP 4.2trln |
|
Source: Multiple publicly available data analyzed by GEPC Researcher
Key lessons from previous budget cycles
The trend shows that some countries have learnt from previous years’ experience and taken some measures to avert the pit falls from the past while others still pursue a Business-as-Usual approach. For example, the Kenyan government conducted extensive public consultation, proposed a modest budget by making some cuts to expenditures for Ministries, Departments and Agencies including parliament. Uganda proposed a modest increase in its budget compared to last year when the government increased its budget by more than 14% compared to the previous year.
On the contrary Tanzania and Rwanda have taken a Business-as-Usual approach by proposing a large spike in their budget size by 13% and 21% respectively compared to last year. This is within the context of an evolving perilous geopolitical context, with disruptions that may affect regional and global economic growth, thereby having a dampening effect on Tanzania’s national growth projections. Moreover, the ongoing political unrests related to the 2025 general elections may equally have an impact on economic growth, investment and aid inflows into the country. Performance of key sectors such as tourism could be affected.
# Regressive taxation of consumption and essential services such water and communication are still prominent in the national budgets despite their distortionary effects and resistance from the citizens
As governments tabled their Budget Framework Papers, so far what is not very clear across all the countries at that stage was the tax measures that governments will implement to raise the domestic tax revenues required to support the budget estimates. Lessons from previous budgeting cycles indicated that taxation to finance the budgets has been concentrated on limited sources and attempts to diversify these sources by taxing essential commodities such as bread and milk met resistance, violence and boycotts in Kenya, Uganda and Tanzania. It is imperative that governments avoid a replay of the same approaches to taxation.
# Tax to finance debt. The debt burden has constantly accumulated exerting pressure on national budgets to pay off. Countries such as Kenya are on the brink of default. Almost half of taxes revenues collected by governments in the EAC will be used to finance debt. Governments are borrowing to pay off debts.
# Taxation to finance huge nugatory public expenditure, such as a large number of unconstitutionally mandated litany of political advisors and assistants. Okoa Kenya civil society network described Kenya’s 2025/26 budget estimates as a budget for political survival. According to Okoa Kenya’s budget analysis, despite significant cuts to some essential sectors such as education, funding for political advisors increased significantly. For example, funding for Government Advisory services under the Executive Office of the President increased by Ksh200 million from Ksh1.1bln to Ksh1.3bln in 2025/26[1].
# Increasing trend of over expenditure on security and classified votes. While expenditure for classified accounts is a common feature in budgets across the world, when this becomes a prominent vote of the national budget such as the case of Uganda, it becomes a major lacuna of concern in undermining the national budget processes as classified accounts can be also conduits for abuse and nugatory expenditures.
Moreover, there is an increasing trend of resources being diverted away from essential long-term social services such as education and health towards financing short term politically attractive initiatives such as PDM, Emiyooga and Hustler Funds, whose repayment trends are not sufficient enough to recycle the funds to other beneficiaries. While these initiatives are commended for channeling funds to reach directly to poor citizens who need them, they are thinly spread and low repayments undercut their concertation and momentum against poverty.
According to Susan Mangeni, Kenya’s Permanent Secretary for Small, Micro and Medium Enterprises report 51% of all hustler funds totaling to Ksh 5bln-11bln could not be recovered and the Non-Performing Loans were soaring at 21% of the total fund[1].
# Perennial supplementary budgets have become a common feature in most governments budget execution cycles. While supplementary budgets are useful as a short-term cure of budget shortfalls, on the flipside, supplementary budgets are expenditures executed outside the traditional budget process and can be subject to abuse as expenditures incurred are only approved by parliamentary oversight retrogressively after they have been spent. Supplementary budgets can therefore be effectively be used by the executive as a mechanism for avoiding parliamentary scrutiny and oversight.
# There is a geopolitical development aid switch from the West towards the East with the UAE and China becoming major aid donors. With dwindling aid from the western capitals such as the US and the EU, Governments in the EAC countries are now courting and embracing new donors with the UAE becoming a prominent new donor. These new donors have strategic interests to pursue whose effects may be equally repugnant to EAC’s member states economic aspirations in the long run. For example, China’s strategic security and resource interests in the region are known but the UAE’s interests in East Africa and the terms for its aid packages are not clearly known.
# Economic distress and such as conflicts and political polarization remains a persistent feature in East Africa’s fragile states such as South Sudan, Somalia and the Democratic Republic of Congo, delaying approval or causing disruptions in planned government expenditure plans.
Recommendations
# Continuously expand the tax base by consistently seeking for new tax revenue sources. These includes reviewing and remodeling of existing tax policies by easing stress on taxation of sectors that affect ordinary citizens.
# Consistently reduce dependence on foreign aid and switch towards mutually beneficial public private sector partnerships to finance large infrastructure projects. The terms for such partnerships must be transparent and subject to public participation so as to avoid exploitative contracts.
# Persistently reduce political structures and cut excessive and bludgeoning expenditure on political processes and positions whose direct contribution to economic growth and wellbeing of the country is negligible
# Increase public participation and respect of citizens views on budget matters and alignment of budgets to citizens demands, interests and concerns. Legislation of meaningful citizen participation in budget process can go far in expanding the quality and citizen’s trust in national budgets
# Constantly review resource taxation to ensure natural resources such as minerals, oil, natural gas, tourism, fisheries and forestry benefit the country and communities where they are located.
# Curb tax evasion and aggressive tax avoidance measures by corrupt individuals and multinational companies that are still chronically contributing and abetting large illicit capital outflows from the countries
Select resources for further reading
Africa Development Bank (AfDB); South Sudan Non-Oil Revenue mobilization and accountability in South Sudan, available at https://www.afdb.org/sites/default/files/documents/projects-and-operations/south_sudan_-non-oil_revenue_mobilisation_and_accountability_in_south_sudan_-_p-ss-kf0-004_-_ipr_february_2025_.pdf
World Bank (March 2025); 7th Edition of South Sudan Economic Monitor (SSEM) titled “A Pathway to Overcome the Crisis” available at https://www.worldbank.org/en/news/press-release/2025/03/13/world-banks-afe-south-sudan-economic-monitor-urges-swift-and-sustained-reforms
[1] https://www.parliament.gov.rw/news-detail?tx_news_pi1%5Baction%5D=detail&tx_news_pi1%5Bcontroller%5D=News&tx_news_pi1%5Bnews%5D=45429&cHash=0f532483c470ea74ca980e0387f0e5a6
[2] https://www.afdb.org/sites/default/files/documents/projects-and-operations/south_sudan_-non-oil_revenue_mobilisation_and_accountability_in_south_sudan_-_p-ss-kf0-004_-_ipr_february_2025_.pdf
[3] ibid
[4] https://www.worldbank.org/en/news/press-release/2025/03/13/world-banks-afe-south-sudan-economic-monitor-urges-swift-and-sustained-reforms
[5] https://www.businessdailyafrica.com/bd/economy/over-half-of-hustler-fund-borrowers-default–4755528