The African Development Bank Group has released its 2026 East Africa Economic Outlook and 2026 Kenya Country Focus Report, presenting a roadmap to help the region sustain strong economic growth while mobilising the finance needed to create jobs, strengthen resilience and accelerate structural transformation.
East Africa remains the continent's fastest growing region for the second consecutive year. Regional growth accelerated from 4.3 percent in 2024 to an estimated 6.6 percent in 2025, supported by resilient private consumption, increased public and private investment, stronger agricultural production and a continuously growing services sector. Growth is expected to moderate to 5.9 percent in 2026 as higher energy prices, geopolitical tensions, and tighter global financial conditions weigh on economic activity.
Despite this resilience, East Africa must fundamentally change how it finances development, the regional outlook pointed out. The region faces an annual development financing gap of $119 billion. Thus, stronger domestic resource mobilisation, deeper capital markets, improved public financial management and greater private sector participation will be essential to finance infrastructure, industrialisation, climate resilience and employment over the coming decade, the report explained.
"Resilience cannot be achieved through isolation," Eva Ruganzu, the Bank's East Africa Regional Implementation Support Manager said during her opening remarks on behalf of Director General Alex Mubiru. "It requires countries to strengthen their domestic capabilities, while also deepening regional cooperation, pooling opportunities, and mobilising capital at greater scale."
Across the region, the report highlights diverse economic opportunities. Burundi is gradually strengthening economic activity despite fiscal constraints. Comoros is making gradual progress despite its small economic base. Djibouti continues to leverage its strategic logistics position. Eritrea continues to record substantial current account surpluses. Ethiopia continues to benefit from strong investment and reform driven growth.
Rwanda remains among the region's strongest performers through sustained reforms and investment. Seychelles maintains sustained growth through tourism. Somalia is pursuing recovery amid continued structural challenges. South Sudan is benefiting from renewed oil production but remains vulnerable to instability. Sudan is showing signs of modest recovery supported by agriculture, services and localized reconstruction activities. Tanzania maintains robust expansion supported by infrastructure and services. Uganda continues to post resilient growth backed by investment and domestic demand.
Panelists said weak institutional frameworks was the primary constraint to transformational growth, and called for coordinated investment delivery, regulatory recognition of guarantees, and stronger project preparation to attract private sector participation.
"We need to grow a regional value chain mindset to achieve our greater potential," argued Betty Maina, East Africa Director for Genesis Analytics, calling for consolidated, targeted investment delivery units to reduce frictions generated between public agencies. "Despite having regional ambitions to develop regional value chains we compromise it by competition, and instead of collaborating we compete, causing limitations and keeping markets small and fragmented."
To spur widescale economic growth, the economic outlook recommends a phased reform agenda. In the short term, East African governments are encouraged to strengthen tax administration, improve public expenditure efficiency and reduce illicit financial flows.
Medium term priorities include expanding public private partnerships, mobilising pension and diaspora capital, and developing stronger pipelines of bankable projects. Over the longer term, the region should deepen financial integration, strengthen local currency capital markets and reinforce regional financial institutions to lower the cost of capital and improve resilience to external shocks.
Kenya focused report calls for innovation to finance its development needs
During the combined report launch, held 28 July at the Bank Group's East Africa Regional Office, the Bank also released its 2026 Kenya Country Focus Report (CFR), narrowing this regional discussion to one of East Africa's largest economies. While the economy remained resilient in 2025, supported by services and investment, fiscal pressures, elevated public debt and unemployment continue to constrain inclusive growth.
Kenya remains a regional hub for trade, finance, logistics and digital innovation with significant long term growth potential. The CFR details that Kenya's principal development financing challenge is no longer strictly access to finance, but mobilising and deploying capital more effectively. Kenya faces an annual development financing need of approximately $14.2 billion and an annual estimated financing gap of $12.5 billion by 2030.
"The region and Kenya face substantial financing requirements, particularly for infrastructure in areas such as energy and digital transformation, but we have serious constrained fiscal space, and therefore, this calls for innovative financing mechanisms as we go forward," said Raphael Otieno, Director General of the Public Debt Management Office at the National Treasury of Kenya. "Kenya realised this, and therefore, we have adopted financing options that avoid putting a lot of pressure on the fiscal deficit."
He noted that the National Infrastructure Fund, a $38 billion state investment vehicle established in March 2026 with the aim of channeling the proceeds of state asset sales and private capital into mega infrastructure projects, would decrease sovereign borrowing.
"We think this is going to really help us drive development at scale, help us leverage the resources from the government, and mobilise other resources from private sector to fill in the development financing gap that we cannot fill in through the debt-creating flows," Otieno said. He urged other countries to adopt similar sustainable development finance alternatives.
The Kenya Report recommends restoring fiscal credibility, strengthening domestic revenue mobilisation, developing a stronger pipeline of bankable investment projects. It also calls for expanding infrastructure and green finance, leveraging pension and insurance assets and deepening financial markets to channel more capital into productive sectors of the economy.
