The African Development Bank (AfDB) has revised East Africa’s GDP growth forecast downward to 5.9% in 2026, down from 6.6% in 2025, citing rising energy costs, geopolitical tensions, and tighter global financial conditions as key factors.
Despite the slowdown, East Africa remains the fastest-growing region in Africa, driven by strong private consumption, increased investments, agricultural gains, and service sector expansion.
Development Financing Gap
The AfDB report highlights a significant annual development financing gap of $119 billion (approximately Sh15.4 trillion) across East Africa. This shortfall hampers progress in infrastructure, industrialisation, climate resilience, and job creation.
Eva Ruganzu, AfDB’s East Africa Regional Implementation Support Manager, emphasized the need for enhanced domestic capabilities and regional cooperation to address this challenge.
Barriers and Recommendations
- Weak institutional frameworks limit investment coordination and delay large projects.
- Regional collaboration is essential to unlock investment opportunities and develop competitive value chains, according to Betty Maina, East Africa Director at Genesis Analytics.
- The AfDB proposes a phased reform strategy:
- Short term: Strengthen tax systems, improve public expenditure efficiency, and reduce illicit financial flows.
- Medium term: Expand public-private partnerships, mobilise pension and diaspora funds, and develop bankable projects.
- Long term: Deepen financial integration and develop local currency capital markets.
Kenya’s Specific Challenges
Kenya faces an annual development financing need of $14.2 billion (Sh1.8 trillion) with an estimated gap of $12.5 billion (Sh1.6 trillion) by 2030. Raphael Otieno, Director General of Public Debt Management at Kenya’s National Treasury, stressed the urgency of innovative financing mechanisms given limited fiscal space.
