OPINION: East Africa's budgets must stop working against its own market

East Africa's growth story remains one of the most encouraging on the continent. The IMF projects the East African Community (EAC) to grow by 5.6% in 2026, above the continental projection of 4.3%. Trade is also expanding.

According to the EAC Quarterly Statistics Bulletin (October-December 2025), total EAC trade rose by 25.4%, from US$124.9 billion in 2024 to US$156.6 billion in 2025. In the last quarter of 2025 alone, trade reached US$42.4 billion, with exports of US$20.8 billion and imports of US$21.6 billion.

Yet one figure should concern every finance minister, manufacturer, trader and investor in the region: intra-EAC trade reached US$19.3 billion in 2025 but still accounted for only 12.3% of total trade. Put simply, East Africa is growing, but it is not trading enough with itself.

That gap matters more in the current global environment. Partner States are preparing their FY2026/27 national budgets amid geopolitical tensions, high fuel and logistics costs, currency pressures and shrinking business margins.

In such conditions, fiscal policy cannot be treated only as a tool for revenue collection. It must also protect firms from shocks, lower cross-border costs and make the EAC single market more predictable.

The FY2026/27 budget cycle should therefore be seen as a regional integration test. If national budgets introduce measures that contradict the Customs Union and Common Market, businesses will continue to face hidden borders even where formal tariffs have been removed.

But if governments use budgets to harmonize fiscal rules, the region can unlock more local sourcing, stronger value chains and faster private-sector growth.

National budgets should be judged not only by how much revenue they raise, but by whether they reduce the cost of doing business across East Africa.

The first priority is disciplined implementation of the EAC Common External Tariff (CET). The CET was designed to support industrialization, encourage value addition and give firms predictable tariff treatment across Partner States. Its purpose is weakened when exceptions multiply.

In June 2024, 1,956 tariff lines, about 22% of total CET tariff lines, were subject to stays of application. By FY2025/26, analysis of national Finance Acts showed 2,464 tariff lines, more than 41%, affected by stays of application and duty remissions.

When exceptions become the norm, the Common External Tariff becomes less common, less external and less predictable. The result is uneven production costs, weaker investor confidence and fewer incentives for companies to build regional supply chains.

A manufacturer in one Partner State should not have to guess whether a competitor elsewhere in the EAC will benefit from different tariff treatment on the same product.

For FY2026/27, Partner States should publish a CET compliance roadmap, phase out unilateral stays of application and apply a common regional test before treating any sensitive tariff line differently.

Where exceptions are genuinely necessary, they should be transparently justified, approved at the regional level, and subject to clear terms and conditions that expire either after a defined period or on a specified date.

The regional product-availability study should also be finalized and published so that duty remissions and local sourcing decisions are guided by evidence. Where adequate EAC supply exists, regional inputs should be prioritized over external imports.

The second priority is domestic tax harmonization. A customs union cannot function properly if businesses clear one set of customs rules at the border only to meet another set of fiscal barriers inside the market.

Differences in excise duties, VAT treatment, income-tax rules and national levies can create border-like costs even when customs duties are not charged.

The most urgent concern is discriminatory taxation of EAC-originating goods compared with similar domestic products. Higher or origin-based excise duties on selected beverages, juices, beer, cigarettes, furniture, plastic products, fish and processed foods create an uneven playing field and undermine the spirit of national treatment. Charges of equivalent effect add another layer of cost. Import Declaration Fees, infrastructure or railway development levies and industrial development levies should not be applied to EAC-originating goods moving within the Customs Union as though they were imports from outside the region.

Several of these measures have already been identified as Non-Tariff Barriers targeted for elimination by June 2026.

The FY2026/27 Finance Acts should become the vehicle for removing them, not extending them. Governments should tax EAC-originating goods as like domestic products, exempt them from charges of equivalent effect and adopt a regional compliance matrix that lists discriminatory taxes and levies by country, with quarterly reporting until they are removed.

New excise measures on regionally traded products should be preceded by impact assessments and structured public-private dialogue.

The third priority is to harmonize the budget consultation process itself. Regional fiscal coordination will remain weak if national tax measures are developed in isolation and presented to businesses only after key decisions have already been made.

Partner States currently follow different consultation calendars. Tanzania's stakeholder submissions are generally due by the end of March.

Uganda's run from September to February. Kenya's are commonly invited between November and December. Rwanda is guided by a multi-year tax reform framework covering 2024/25 to 2029/30.

These differences may look administrative, but they have real consequences. They make it harder for regionally active companies to analyse proposals, compare market impacts and provide timely input before Finance Bills are finalized.

They also weaken regional platforms such as the Sectoral Council on Finance and Economic Affairs and the EAC Pre-Budget Consultations of Ministers of Finance, because some national proposals are already too advanced by the time regional concerns are raised.

A practical solution is available. The EAC should adopt a common pre-budget consultation calendar: national treasury submissions from September to February, technical review from February to March, and parliamentary submissions from March to May.

Proposed tax changes, explanatory notes and trade-impact assessments should be published at least 30 days before Cabinet or parliamentary consideration.

A formal private-sector session, including the East African Business Council, should be reserved in the EAC pre-budget process so that the regional trade impact of tax proposals is assessed before Finance Bills are locked in.

This is not a call for governments to abandon revenue mobilization. Public services, infrastructure and development priorities all require sustainable revenues. But revenue measures that fragment the regional market can cost economies more than they collect.

They raise transaction costs, discourage scale, reduce competitiveness and keep firms national when the opportunity is regional.

East Africa's private sector is not asking for special treatment. It is asking for rules that match the commitments Partner States have already made: a functioning Customs Union, a credible Common Market and a predictable environment for investment across borders.

The message for FY2026/27 is for all fiscal measures to be harmonized. Publish clear timelines. Remove trade-distorting taxes and levies. Restore discipline to the Common External Tariff. Bring businesses into the budget process early enough for consultation to matter.

If the EAC wants intra-regional trade to move toward 40% by 2030, national budgets must stop pulling in different directions.

The region has the demand, the entrepreneurs and the production potential. What it needs now is fiscal policy that allows East African firms to trade freely, scale confidently and build resilience together.

The writer, Ahmed Farah, is the Executive Director, East African Business Council