East Africa economic outlook 2025
East Africa is set to remain the fastest-growing region in the continent, driven by trade, infrastructure, and tech advancements, despite challenges like rising debt and high inflation
East African economies: Key takeaways
The 2025 East Africa economic outlook dives deep into macroeconomic indicators like growth-rate forecasts or estimates and key risks for five major geographies in the region: Ethiopia, Kenya, Tanzania, Uganda, and Zambia.
- Ethiopia: Strong gross domestic product growth (7.2%) is expected, despite falling from an estimated 8.1% in 2024, driven by investments in mining, agriculture, and energy. However, key risks remain, especially from potential political instability and inflationary pressures.
- Kenya: Economic momentum is supported by agricultural recovery, tourism, and investment reforms, but high public debt and vulnerability to climate shocks pose significant risks. The economy is expected to grow by 5.3% in 2025 from an estimated 4.7% in 2024.
- Tanzania: Sustained economic growth is fueled by infrastructure and energy projects, but depreciation of the Tanzanian shilling and rising import costs could challenge the country’s economic stability. GDP growth accelerated to 5.6% in 2024, compared with 5.1% in 2023.
- Uganda: Accelerated growth from oil sector investments and regional trade is anticipated, though delays in oil production and external debt vulnerabilities remain key risks. The economy grew 6.1% in 2024 compared with 5.3% growth in 2023.
- Zambia: Economic resilience is bolstered by strong performance in agriculture, a rebound in the mining sector, and progress in debt-restructuring processes. However, persistent inflation and currency volatility remain key concerns. The country’s GDP growth decelerated to 4% in 2024 from 5.4% in 2023, in line with the Sub-Saharan average.
For detailed analysis by country, refer to the sections on each respective geography.
Ethiopia
Ethiopia’s economy is projected to grow by 7.2% in 2025, down from an estimated 8.1% in 2024 (figure 1). This growth is expected to surpass the Sub-Saharan average, which is forecasted at 3.7%1 for 2025. Average real GDP growth is projected to stand at 8% over the forecast period (from 2025 to 2029). As inflation eases in the second half of this period, the Economist Intelligence Unit projects private spending to rise from 5.6% in 2027 to 9% in 2028, and reach 8.5% by 2029. Additionally, goods and services exports will gradually increase through the forecast period.
Some key drivers of this growth will include the expansion of the Ethiopian Airlines fleet,2 a boost in agricultural output,3 and a rise in electricity generation as the government anticipates adding at least 2,500 megawatts of capacity to the country’s power grid.4 Additionally, the launch of the Tulu Kapi gold and copper mine in Oromia in 2025 will also contribute significantly to this growth.5
The Ethiopian economy is expected to be largely unaffected by the recently implemented US tariffs due to low rates proposed (10%)6 and minimal export reliance on the United States, particularly with stable coffee demand and high prices. Meanwhile, the successful progression of Ethiopia’s debt-restructuring efforts, including an International Monetary Fund (IMF) program7 and an agreement with official creditors,8 will provide substantial debt-service relief, easing pressures and freeing up funds for vital public investments, thereby boosting the overall economy.
Since the announcement of new monetary policies and foreign exchange reforms, inflation has moderated over the second half of 2024 and early 2025, dropping from 20.8% in 2024 to 15% in February of this year. This was contingent on several factors, including restrictive monetary policy and the effect of a pre-reform adjustment of retail markets to parallel-market exchange rates.
The introduction of temporary subsidies for essentials like fuel, fertilizers, medicine, and edible oil9 has helped to mitigate some of the effects of currency depreciation. The reduction of monetary financing toward decreasing the country’s fiscal deficit, effected by the National Bank of Ethiopia, is expected to moderate inflation and counteract second-round inflationary effects resulting from the currency’s value adjustment. Inflation is estimated to decrease from 20.8% in 2024 to 19.1% in 2025.
The newly established Ethiopian Securities Exchange will help boost the country’s foreign direct investment inflows by creating a platform for local companies to raise capital.
Furthermore, declining global fuel prices are likely to offset the inflationary impact of lifting temporary fuel subsidies in the second half of 2025 and the sustained currency depreciation throughout the year. It is anticipated that a tighter monetary policy will reduce inflation to a single-digit territory by 2028. However, increased second-round inflation resulting from currency adjustments and external supply chain disruptions poses a threat to the anticipated single-digit inflation.
The birr has lost more than half its value since the government floated it on July 29, 2024, weakening it from 57.7 per US dollar in July 2024 to 128.1 per dollar at the end of December 2024. The official rate is now broadly in line with the parallel market. The policy shift has largely eliminated black-market currency trading.10 The adjustment was a prerequisite for approval of the IMF program and has helped to shore up foreign-exchange reserves from US$1.4 billion in July 2024 to US$3.4 billion at the end of August 2024. With the official rate aligned with the parallel market, volatility is expected to go down in 2025, along with a relatively moderate decline in the birr’s value to 153.1 per dollar at the end of 2025. The consistent weakening of the birr is likely due to a persistent current account deficit, high public debt, and inflation rates that remain higher than those of the country’s trading partners. However, a narrowing deficit could help slow the birr’s depreciation over time. By 2029, its value is estimated to reach 188.8 per dollar.
Ethiopia’s foreign reserves, which were critically low during fiscal 2022 to 2023, experienced a significant recovery in 2024 due to monetary policy reforms and the approval of the previously mentioned IMF program, reaching US$3.8 billion by the end of the year. Although there are still near-term pressures related to trade and imports, support from the IMF, expected foreign investments, and bilateral agreements are anticipated to strengthen reserves. However, the government’s commitment to reforms and fiscal management under the guidance of the IMF will be essential for sustained improvement.
Foreign direct investment (FDI) is expected to remain strong, with an estimated influx of US$4.1 billion received in 2024 —a 28.1% increase from the previous year.11 However, this growth may not be sufficient to stabilize the country’s external finances. To encourage further investment, the government plans to open several major economic sectors to foreign participation, aiming to alleviate some of the foreign currency shortages that are currently hindering faster development.
Recent policy measures have improved current account convertibility and aligned the exchange rate more closely with market fundamentals, reducing some risks associated with foreign trade and payments. Since July 2024, new external inflows have enhanced the country’s foreign exchange position. These measures include allowing exporters to retain 50% of their foreign exchange proceeds (up from 40%),12 eliminating surrender requirements to the central bank, lifting import restrictions,13 and removing regulations on the government’s allocation of foreign currency.14
Ethiopia’s growth opportunities
Despite economic and political challenges, there are several growth opportunities for Ethiopia. The country is expected to achieve an average GDP growth of around 8% annually between 2025 and 2029. This growth will be propelled by sustained government spending and investment, along with a gradual growth in exports. The approval of the IMF’s Extended Credit Facility is likely to encourage external inflows and investments.15
Key sectors poised for significant growth and foreign investment include agriculture, mining, energy, retail, real estate, banking, telecommunications, and transport. Notably, the recently established Ethiopian Securities Exchange16 will help boost the country’s FDI inflows by creating a platform for local companies to raise capital. A new directive permitting foreign investors to participate in raw coffee exports,17 Ethiopia’s largest revenue source, is also expected to boost competition and productivity in this vital sector.
Initiatives like airline fleet expansion, enhanced agricultural outputs, increased power generation, and gold and copper exports from the Tulu Kapi will add to Ethiopia’s green shoots. Furthermore, the liberalization of the banking sector to foreign investors in December 2024 is set to increase competition, expand financial access, and attract essential foreign investment.18 Additionally, improving relations with the West is expected to catalyze external financing, further enhancing growth prospects.
Key risks to Ethiopia’s outlook
Ethiopia’s political instability—marked by fragile peace deals and continued insurgencies—poses substantial risks that could undermine economic growth.19 This, coupled with high inflation rates (figure 2), could present a risk of socioeconomic unrest. Ethiopia is struggling with economic policy adjustments involving a shift to a floating exchange rate and an interest rate–based system. This challenge is highlighted by the existence of a persistent parallel market, indicating a shortage of official foreign exchange and a lack of public confidence in the birr.
Additionally, Ethiopia’s public debt, which was estimated to be around US$53.8 billion in 2024, driven by the state-led growth model, presents significant financing pressures (figure 1). This burden becomes particularly evident when considering the country’s ratio of debt to foreign exchange reserves (figure 2), which stands at approximately 14.16.20 To put this into perspective, this is considerably higher than Kenya’s ratio of around 8.6, suggesting a greater risk of external liquidity issues, as the country’s readily available foreign currency reserves are relatively small compared to its external debt obligations. These pressures are further compounded by a recent Eurobond default,21 suspended USAID funding,22 and persistent internal conflicts.23
While ongoing reforms and increased foreign exchange inflows may provide some relief, the upcoming election presents significant risks to currency stability and political conditions. Nonetheless, there have been improvements in the banking sector risks due to government reforms and efforts.
Kenya
The Kenyan economy is showing signs of resilience and growth, with GDP projected to grow 5.3% in 202524 from 4.7% in 2024 (figure 3). This economic growth is underpinned by accelerated growth in the agricultural sector, government investment in infrastructure, private sector growth due to the easing of domestic interest rates, and improvement of regional trade. Kenya is also expected to benefit from ongoing digital transformation efforts and an active workforce.
However, there are potential risks that could influence this outlook, such as climate shocks, debt-servicing pressures, internal political instability, and geopolitical uncertainty.25 Despite these challenges, Kenya’s strategic focus on innovation26 and regional trade integration positions the country for continued economic progress, making it a notable performer within Sub-Saharan Africa. Looking ahead, the country’s macroeconomic outlook is optimistic, and GDP is expected to grow by 5.8% per year between 2025 and 2029. The country is expected to build on preexisting fiscal and structural reforms to support this growth.27
For Kenya, the projected 5.3% GDP growth in 2025 outpaces the Sub-Saharan Africa average, which is forecasted at 3.7%.28 This economic growth is primarily supported by the continued recovery in business activity due to domestic demand growth. Further, the agricultural sector is expected to grow 4.3%29 in 2025, supported by targeted government efforts such as the distribution of subsidized fertilizers and seeds.30 This growth is particularly significant, given it contributes nearly 20% of Kenya’s GDP and employs 40% of its population.31
Tourism is expected to grow by 24%32 in 2025, with Kenya expected to receive 3 million tourists, up from 2.3 million in 2024. Government initiatives within the sector, such as marketing campaigns, enhanced tourism product diversification, adoption of digital platforms, and the introduction of new scheduled flights, are expected to be instrumental in this expansion, consequently improving the sector’s contribution to GDP growth.33
Similarly, the financial services sector demonstrated resilience, contributing steadily to Kenya’s GDP through increased transaction volumes, improved lending activities, and the development of innovative financial products. This stability, coupled with the widespread adoption of mobile money services—part of Kenya’s “digital economy” plan—has fueled significant growth in the IT sector, which directly contributes around 9.24% of the country’s GDP.
Further, the Kenyan government plans to increase the manufacturing sector’s contribution to GDP to 12% in 2025, up from 8% in 2024.34 The government is focused on boosting manufacturing through targeted incentives and policies aimed at increasing its GDP contribution and creating jobs. This includes reducing the cost of production, improving the ease of doing business, and investing in infrastructure to support industrial growth.
Lastly, increased access to electricity—especially in rural areas, where coverage is expected to rise from 75% in 2024 to 78% in 2025—is key to boosting productivity and driving small and medium enterprises’ growth across sectors.
The Kenyan economy is expected to grow at an average rate of 5.8% between 2025 and 2029, influenced by digital transformation, which is expected to enhance the efficiency of transactions and create new economic opportunities. This, in turn, will add to regional integration efforts, which will improve trade exports and bring in strong remittance inflows from Kenyans working abroad, providing a significant boost to the overall economy.
Expected declines in Kenya’s interest rates will help reduce borrowing costs, promote increased spending, and ultimately bolster economic growth.
Inflation saw a significant drop to 4.5% in 2024, compared with a high of 7.7% the previous year (figure 4), which was largely due to decreased food inflation—a positive outcome of favorable weather patterns—alongside a general fall in international food commodity prices. Fuel inflation also eased, following downward adjustments by the Energy and Petroleum Regulatory Authority.35
Looking ahead at the rest of 2025, inflation is expected to remain at 5%.36 This decrease in prices led the Monetary Policy Committee to lower its benchmark interest rate from 10.8% on Feb. 5, 2025, to 10%37 on April 8, 2025. These rate cuts suggest an accommodative monetary policy stance aimed at stimulating economic activity as inflation continues to moderate. A predictable and moderate inflation rate fosters a more stable operating environment for businesses, thereby facilitating improved decision-making. Inflation is projected to hover around 5% to 6%, growing to 6.7% in 2029, partly attributable to a weakening Kenyan shilling (figure 4), which will likely lead to a rise in import costs.
Kenya’s growth opportunities
Kenya’s lending rate had reached 16.6% in 2024, mainly as a result of the central bank raising the central bank rate (CBR) to 12.5% in February 2024 to curb inflation.38 By the close of 2024, the central bank reduced the rate to 11.25%, with the goal of lowering lending rates and thereby encouraging private sector borrowing and economic growth.39 In February 2025, the central bank reduced the CBR to 10.75%, and then to 10% in April 2025 to encourage the private sector to lower their lending rates.40
The CBR is further expected to fall to 8.5% by the end of 2025. The lending rate is expected to go down to 15.4% in 2025. The expected decline in Kenya’s interest rates will help reduce borrowing costs, promote increased spending, and ultimately bolster economic growth.
Kenya is expected to increase its banks’ capital adequacy requirement from 1 billion shillings to 3 billion shillings by the end of 2025, and eventually to 10 billion by the end of 2029.41 The aim of the higher capital adequacy requirement is to create a more stable and secure financial sector, which will allow the central bank to pursue a more accommodative monetary policy.
Kenya remained a compelling investment destination in Africa, particularly within the renewable energy and technology sectors. The removal of the 30% domestic equity requirement for information and communications technology companies was a strategic move aimed at enhancing the investment environment by streamlining market access for foreign investors. In 2024, the FDI landscape experienced dampened investor confidence as well as disrupted economic activity attributable to political instability.42 Nevertheless, the implementation of economic and structural reforms by the administration provided a degree of support to boost confidence in financial markets. In 2025, the foreign investment outlook is more optimistic, supported by a strong performance in fixed investment following interest-rate adjustments of 1.2% and robust remittance inflows worth US$422.8 million.
The anticipated growth in FDI inflows between 2026 and 2029 is related to Kenya prioritizing foreign investment attraction as a key component of its economic development strategy. This commitment is further demonstrated through significant ongoing reforms, including a comprehensive review of the Investment Promotion Act of 200443 and the development of special economic zones44 that offer regulatory predictability and high-quality infrastructure. These investor-ready zones aim to enhance Kenya’s attractiveness for export-oriented and industrial investments in key sectors such as technology, infrastructure, agro-processing, and financial services.
Foreign exchange reserves saw an increase of 9.9% to US$11.1 billion in 2025 from US$10.1 billion in 2024 (figure 4).45 Several positive macroeconomic developments in 2024 contributed to the recovery of foreign exchange reserves, including increased inflows from exports, tourism, and diaspora remittances, as well as the central bank’s intervention to stabilize the value of the shilling. The resulting appreciation mitigated the cost of servicing dollar-denominated debt and reduced the local currency cost of imports, thereby easing pressure on foreign currency demand and providing a more robust buffer against external shocks.
Looking ahead to 2026 and 2029, projections indicate a positive trend. The resolution of external financing pressures, such as significant Eurobond repayments due between 2025 and 2031, worth US$4.2 billion, supported by loan disbursements from international institutions, will likely augment foreign exchange reserves.46
Key risks to Kenya’s outlook
Following a period of significant depreciation—which saw the shilling reach a rate of 156.5 per US dollar in 2023—Kenya’s currency recovered, appreciating to 129.3 per dollar in 2024 (figure 4). This was largely due to the positive market responses to the Eurobond issuance worth US$1.5 billion47 and new loans from the IMF48 and the Trade and Development Bank,49 which backed the currency’s value. While the Kenyan shilling remained stable during the first quarter of 2025, it is expected to depreciate towards the end of the year due to the effects of inflation.
Furthermore, the country’s current account deficit is projected to widen due to its high import reliance. Simultaneously, the continuous easing of the CBR is set to increase demand for foreign currency, which will weaken the Kenyan shilling. A depreciated shilling raises import costs, fueling inflation given Kenya’s dependence on imported goods like fuel. This inflationary pressure will ultimately dampen Kenya’s economic growth.
Further gradual currency depreciation will follow from 2026 to 2029 (figure 4), leading to a rate of 177.5 shillings per dollar at the end of 2029. This is due to the country’s sustained inflation levels and its position as a high net importer—both contributing to the increased demand for foreign currency and an increased current account deficit.
Kenya’s public debt has been a significant area of focus in recent macroeconomic discussions, with the debt rising to 11.3 trillion shillings in 2024—a 10.8% increase from 2023 (figure 3). This is attributed to borrowing for finance infrastructure and social projects, as well as the depreciation of the local currency.50 The expected rise in public debt to 12.4 trillion shillings in 2025 is attributable to the government seeking alternative financing to plug the tax-revenue shortfall caused by the annulment of the 2024 Finance Bill.51
In 2025, the government is focusing on increasing tax revenues through the implementation of a revised finance bill,52 which seeks to amend key tax statutes, including the Income Tax Act, VAT Act, Excise Duty Act, and the Medium-Term Revenue Strategy. These measures are aimed at enhancing the revenue-to-GDP ratio, thereby potentially reducing reliance on borrowing and contributing to fiscal deficit reduction—both crucial for effective debt management.
Kenya’s export markets face potential disruptions due to prevailing geopolitical tensions. The United States, a significant export partner—accounting for 6% of Kenya’s exports53 (primarily textiles)—likely presents a risk due to potential shifts in its trade policy: Kenya was hit with a 10% tariff on exported goods (including apparel, coffee, and tea) under the current US administration, and it faces the impending expiry of the African Growth and Opportunity Act in September 2025.54
Ongoing conflicts in the Middle East could lead to volatility in international oil prices. The increase in tensions could cause a disruption in supply and will drive up the oil prices, increasing Kenya’s energy-import costs. The Russia-Ukraine war has also impacted fertilizer prices; continued disruptions in fertilizer supply could negatively affect Kenya’s agricultural sector, dampening the momentum of its economy.
Adding to the complexity of geopolitics are regional dynamics such as the political tensions that have emerged between Kenya and the Democratic Republic of Congo, within the East African Community (EAC),55 which could impede regional integration efforts and potentially limit economic opportunities for Kenyan businesses.
Last year, the introduction of the 2024 Finance Bill sparked countrywide protests due to proposed tax hikes on essential goods and services. These protests, largely led by the youth, disrupted economic activities, particularly in June and July, leading to business closures and a slowdown in local economic activity. Investor confidence was also negatively impacted by this political instability,56 potentially discouraging both local and foreign investment.
Further, Kenya was sanctioned by Sudan over links to Rapid Support Forces sympathizers,57 leading to the loss of a key export market for tea, coffee, and other agricultural goods. This has the potential to negatively impact cross-border trade and investment activities, while heightened security concerns and overall uncertainty can disrupt established economic links.
Tanzania
Tanzania’s real GDP was estimated to stand at US$73 billion in 2024, representing 5.6% economic growth from 2023 (figure 5).58 This was primarily driven by robust performance in key sectors such as services—particularly tourism and telecommunications—and sustained expansion in the industry and construction sectors, fueled by ongoing infrastructure investments.
Supported by its main sectors (services, industry and construction, and agriculture, each contributing 43%,59 31.2%,60 and 25.8%61 to its GDP in 2024, respectively), Tanzania’s economy is expected to grow 6% in 2025, comparing favorably against Sub-Saharan African (3.7%) and global (1.9%) numbers.62 The expected growth is anchored on increased tourist numbers, with arrivals expected to reach 3 million in 2025—significantly higher than the 1.81 million in 202363 and the 2.14 million international arrivals in 2024.64 However, the projected growth will face downside risks stemming from economic disruptions from the upcoming October 2025 elections, and the possibility of reduced agricultural yields due to unfavorable weather conditions.
Inflation is expected to marginally increase to 3.3% in March 2025 from 3.1% in 2024,65 a spillover effect from the sharp (9%) decline in the value of the Tanzanian shilling against the US dollar in 2024 (figure 6).66 The sharp depreciation had a knock-on effect on consumer prices, considering the country’s heavy reliance on imported products like oil.67 The Bank of Tanzania, the country’s central bank, is expected to hold the policy rate constant at 6% to manage the country’s inflation in light of higher import prices. However, the country could benefit from falling prices of global commodities like crude and refined oil, which could, in turn, facilitate the cutting of the interest rate to 5.5% in the fourth quarter of 2025.
In 2024, the shilling depreciated by 9% against the US dollar, marking its highest decline since 2016.68 It experienced higher depreciation in the first half of 2024, driven by unprecedented demand for the US dollar due to increased imports (versus exports).69 The currency was, however, able to stabilize in value in the latter half of 2022, following a series of government interventions and significant improvements in the country’s current account deficit.
Notably, in May 2025, the Tanzanian government implemented a directive prohibiting the use of foreign currencies for local transactions and payments, aiming of reduce foreign-currency demand and stabilize exchange-rate movements. The shilling is expected to maintain relative stability, depreciating by a lower rate of 3.7% in 2025, mostly driven by the country’s widening current account deficit (projected to be 3.2% of the GDP in 2025, compared with 2.5% in 2024)70 and election-related speculative volatility. Tanzania is expected to maintain sufficient reserves to cover four months of imports in 2025.
The country’s total public debt was estimated to stand at US$34.7 billion in 2024, representing a 7.3% growth from 2023.71 The growth was attributable to government borrowing for infrastructure projects, depreciation of the Tanzanian shilling against major currencies, and the inclusion of National Social Security Fund and Pension Protection Levy obligations into public debt.
The country’s debt stock was largely sourced externally, with foreign debt accounting for 65.1%, compared with 34.9% from domestic debt.72 External debt comprised multilateral loans (69.2%), commercial borrowings (25.4%), and bilateral loans (5.4%). On the other hand, domestic borrowings comprised treasury bonds (81%), treasury bills (7%), and others (12%).73 Despite increased debt levels, the country’s debt as a percentage of GDP was estimated to average 49.1% (figure 5)—below the IMF threshold of 50%.74
Tanzania remains confident in its ability to meet its debt obligations in the short term, a view affirmed by the IMF during the fourth review under the Extended Credit Facility in December 2024.75 However, the country will continue to face downside risks stemming from exchange-rate volatility, which could create uncertainty regarding debt-servicing costs and budget planning.
Tanzania’s growth opportunities
One of Tanzania’s strengths is stability, bolstered by the dominant position of the ruling Chama Cha Mapinduzi (CCM) party. The CCM’s entrenched position ensures policy continuity and few headwinds to the policymaking process. The country is a founding member of the EAC, a regional intergovernmental organization comprising six partner states.76 The bloc has a cumulative population of 174 million as of 2025, of which over 30% is urban.77 The partners’ combined economy stands at US$163.4 billion in 2025.78
Tanzania could benefit greatly from the full realization of EAC goals, including reduced trade tariffs and common market protocols. Furthermore, Tanzania is also set to benefit from the realization of the African Continental Free Trade Area (AfCFTA), which aims to develop a single continental market for goods and services. Like the EAC, the AfCFTA will help Tanzania access a larger market on more favorable terms. Notably, the AfCFTA connects over 1 billion people across 54 countries with a combined economic value of US$3.4 trillion.79
Tanzania is actively investing in infrastructure projects, aiming to be a regional transport hub and a gateway to East and Central Africa.
Tanzania is actively investing in infrastructure projects, aiming to be a regional transport hub and a gateway to East and Central Africa. Notably, the country’s construction sector grew 8% in 2024 and is projected to grow by 10.1% in 2025, supported by a healthy infrastructure pipeline of railway, port, and energy projects.80
The country has two major railway projects in its pipeline: the construction of the Tanzania-Burundi standard-gauge railway line81 and the upgrade of the Tanzania-Zambia railway line.82 The country is also upgrading the Dar es Salaam port to increase its capacity to 28 million tons in 2025, from 13.8 million tons.83 Additionally, the country is also upgrading the Port of Tanga to allow larger vessels to dock at the facility.84
These transport projects will be key for promoting intra-regional trade by facilitating imports and exports for neighboring landlocked countries. The projects will serve as a critical catalyst for the country’s mining, industry, and oil and gas sectors, and help generate foreign exchange. Lastly, Tanzania is set to ramp up electricity production by 2.1 gigawatts upon the completion of the Julius Nyerere Hydropower Plant in 2025.85 In February 2025, Tanzania unveiled a plan to revamp its power grid, which will help increase electricity coverage in the country.86 Increased electricity production will be crucial to accelerating Tanzania’s industrialization and economic growth.
Tanzania, like other Sub-Saharan African economies, has a favorable population structure, which can be tapped into in the short to medium term. Its population is projected to grow by 2.9% to reach 70.6 million in 2025 and by 18% to reach 80.9 million in 2030.87 According to Business Monitor International, the active-age population in 2025 is estimated to be 38.8 million (55%) and is projected to reach 45 million (56.3%) in 2030.88
According to a World Bank report, Tanzania’s literacy rate in 2022 averaged 76%,89 which, combined with the expanding active-age population, could significantly benefit the country’s labor pool. Tanzania’s disposable income per household in 2025 is estimated to stand at US$2,623.7 and is projected to grow by an average of 2.9% per year between 2025 and 2029.90 This is critical for Tanzania’s economic growth, considering household spending was estimated to contribute up to 55.8% of Tanzania’s economy in 2024.91
Key risks to Tanzania’s outlook
Despite the central bank’s successful efforts in containing the shilling’s depreciation, the country will continue facing concerns over foreign currency risk in 2025. This is due to structural issues and weak market sentiment, alongside expected election-related volatility. Continued depreciation of the shilling could inflate the country’s debt burden by ballooning the interest and principal components. Ultimately, this could constrain Tanzania’s ability to comfortably repay the debt, which could lead to lower credit ratings and affect ease of borrowing in the future.
In addition, higher exchange rates could negatively impact import prices, resulting in imported inflation. Tanzania will also continue to face climate-related risks, which have a significant impact on the country’s agricultural sector. Tanzania’s agricultural sector, which is mostly rainfall-dependent, remained a crucial component of its economy in 2024, contributing 25.8% to total economic growth through the year, while employing approximately two-thirds of the population, consistent with the 65.4% reported in 2023.92 Hence, climate-related shocks, such as extended droughts or excessive rainfall, could adversely affect the economy.
Lastly, the ongoing US tariffs present moderate risk to Tanzania’s economic outlook, not through direct trade with the United States (which remains limited) being affected, but through a potential for a slowdown in global economic growth. This global slowdown could reduce demand from Tanzania’s major trade partners in Asia and the Middle East, indirectly affecting export revenues.
Uganda
Uganda’s economy remained resilient despite global economic uncertainty, with growth accelerating to 6.1% in 202493 from 5.3% in the previous year (figure 7).94 This was driven by the expansion in the services sector, which accounts for 43.1% of the GDP, and the industrial sector, which contributes 24.9%.95 Higher exports, primarily of gold and coffee, increased investment in the oil industry, and fewer disruptions to the global supply chain boosted growth. Additionally, government initiatives like the Parish Development Model, a national program aimed at promoting local economic development and improving household incomes by improving service delivery, enhancing financial inclusion, and promoting income-generating activities, have contributed to growth.96
Real GDP is expected to experience accelerated growth, averaging 6.9% in 2025, supported by stronger regional trade as global supply chains normalize. Going forward, the oil sector will continue spurring investments in wells and pipelines, stimulating further growth and future exports. This will follow the construction of the East African Crude Oil Pipeline97 and other large oil projects, along with supporting infrastructure. Consequently, GDP is projected to grow steadily to 7.4% in 2026, before dropping marginally to 7.1% in 2027, as oil production plateaus.
As construction activity slows toward the completion of such large oil projects, GDP growth will be mainly supported by a rise in oil exports, which are forecasted to average 6.9% and 7% in 2028 and 2029, respectively. These developments would position Uganda as an important oil exporter and improve regional trade, contributing significantly to the economy. This is expected to mitigate the negative effects of tight monetary policy, the ongoing fiscal consolidation, and uncertainties from the conflict in the Middle East. However, this positive outlook could be curtailed by the agricultural sector, which will continue to be adversely affected by climate change–driven risks.98
The country reported subdued inflation in 2024, averaging 3.3% (figure 8),99 supported by falling food prices, tightening of monetary policy, and relative stability of the exchange rate. Inflation remained low, at an average of 3.5%, going into the first quarter of 2025,100 and is expected to remain below the central bank’s target of 5% in the medium term.
The Economist Intelligence Unit anticipates inflation to rise steadily to 4.2% in 2026 and 4.6% in 2027,101 as a result of demand-side factors stemming from strong economic growth. Subsequently, imported inflation from rising global food prices is projected to increase marginally. However, this would likely be curtailed by tight monetary policy aimed at keeping consumer inflation steady at 5% in 2028. In 2029, inflation will likely drop marginally to 4.9%, owing to a stable Ugandan shilling, falling global oil prices, and easing of demand-side pressure as the construction of major infrastructural projects approaches completion.102 Nonetheless, persistent inflationary pressures from supply chain disruptions, geopolitical tensions, and commodity-price volatility could lead to tight monetary policy, which would likely put constraints on business and investment.103
The Bank of Uganda has maintained the CBR at 9.8% since October 2024.104 This rate, according to the Monetary Policy Committee, is suitable for balancing price stability and encouraging sustainable economic growth. This decision was upheld in February 2025 due to anticipated inflationary risks.105 The Monetary Policy Committee noted that while near-term inflation is projected to remain below target, persistent global and domestic uncertainties could trigger higher inflation.
The Ugandan shilling appreciated modestly in the first quarter of 2025. This is attributable to US dollar earnings from gold-export revenues, portfolio investments, and remittances, and rising FDIs linked to oil sector development. The Economist Intelligence Unit forecasts a brief period of stability for the shilling, followed by a gradual depreciation within the central bank’s acceptable range. This anticipated decline is attributed to a growing current account deficit, primarily due to significant capital goods imports for oil sector development, which is expected to add to ongoing downward pressures on the currency.106
The shilling is projected to experience increased volatility and sharp depreciation starting in late 2025, leading up to the elections in early 2026. While the expected depreciation will likely subside after the elections, the increase in the current account deficit, from US$5.3 billion in 2025 to US$5.7 billion in 2027, will continue to exert downward pressure on the shilling.
Between 2027 and 2029, the current account deficit is expected to decrease from US$5.7 billion to US$3.6 billion. Additionally, revenue from the petroleum sector is projected to begin in 2028, following the completion of the East African Crude Oil Pipeline (EACOP). These factors are expected to slow down the rate of currency depreciation.
Uganda’s public debt position has continued to expand. As of December 2024, the total public debt was 96.3 trillion shillings—an increase of 4.2% from 92.4 trillion shillings in 2023.107 The nominal debt-to-GDP ratio also increased from 46.9% to 52.1% over the same period (figure 7). Over the past decade, Uganda’s domestic debt stock has been lower than the external debt by an average of US$3.8 billion throughout the period. However, by the first half of 2024 to 2025, the gap narrowed to US$510 million, following increased domestic lending. This increase in domestic lending was a result of the government’s strategy to issue treasury bonds to settle debts with the central bank and to finance the budget deficit for 2024 to 2025.108
Uganda’s public debt is projected to remain sustainable in the medium to long term but faces a moderate risk of debt distress. Key vulnerabilities include the high cost of credit and its associated debt-service burden, alongside slow export growth. To mitigate the cost of debt, the government will prioritize concessional financing where feasible, before considering non-concessional options. The government is also committed to reducing domestic borrowing to finance deficits. This aims to decrease the high-interest payments associated with domestic debt and lessen the negative impact on private sector growth. The government plans to focus on increasing export revenues, enhancing the returns on public investments, and enhancing the overall efficiency of government spending.109
Uganda’s growth opportunities
One of the biggest opportunities for Uganda is that commercial oil production is expected to begin in the fourth quarter of 2025. This is anticipated to increase investments, exports, and government revenues. Major projects like the EACOP have already attracted substantial FDIs, thereby creating jobs and stimulating growth across sectors such as construction, transport, and business services.
Uganda maintains stable macroeconomic conditions. Inflation has remained below the 5% target due to easing food prices and prudent monetary policy. The Bank of Uganda has maintained its CBR at 9.8% since October 2024, a decision intended to support economic expansion while controlling inflation risks stemming from global uncertainties.110
The Ugandan shilling has also demonstrated strong performance in the first quarter of 2025, appreciating against the US dollar to 3,727 per US dollar from 3,756 per dollar in 2024. This is attributed to increased remittances, stronger coffee and cocoa exports, and rising investor confidence. Improvements in trade balances, enhanced access to private sector credit, and more robust public debt management are creating new opportunities in agro processing, manufacturing, and information and communications technology. These developments are expected to foster diversification and enhance the resilience of Uganda’s economy in the future.111
Key risks to Uganda’s outlook
Uganda’s heavy reliance on the rain-dependent agriculture sector exposes it to climate shocks and risks and is projected to cost the country between 2% to 4% of its GDP annually.112 Additionally, increased conflicts in the Middle East could adversely impact the country’s economic growth, given nearly 26% of Uganda’s exports are to countries in that region.
A recent ban on commodities linked to deforestation by the European Union also poses an immediate threat to Uganda’s coffee exports. Other external risks include supply chain disruptions around the Red Sea and intensifying regional insecurity, which could slow trade and delay investments.
Domestic risks are related to sudden rises in public expenditure, especially on infrastructure, compared to weak tax revenues. Moreover, fiscal risks due to the upcoming 2026 election cycle may lead to overspending and borrowing, which undermines budget credibility and investor confidence. Funding delays leading up to the postponement of the EACOP, and the consequent delayed revenue generation, also pose a significant downside risk. Finally, the inflationary pressures from supply chain disruptions, geopolitical tensions, and volatility in commodity prices are likely to trigger a tighter monetary policy from the Bank of Uganda, which would constrain businesses and incomes, thereby reducing the level of economic activity and investment in the country.113
Overall, East Africa remains on track for growth, with governments and private sector players leveraging trade, technology, and resource development to drive economic transformation.
Zambia
The Zambian economy demonstrated resilience in 2024, despite significant economic shocks such as the drought between 2023 and 2024.114 It severely impacted hydropower generation, leading to prolonged power outages, and devastated the agricultural sector, necessitating food relief in some regions. Despite these challenges, preliminary figures from the Zambia Statistical Agency in March 2025 indicate an encouraging 4% economic growth for 2024 (figure 9),115 mirroring the Sub-Saharan average of 3.7%.116
Looking ahead, Zambia’s economy is projected to strengthen in 2025 and beyond. This will be driven by the projected rebound in the agriculture sector due to improved rainfall, and accelerated growth in the mining sector, supported by increased copper output, which aligns with the production target of 3 million metric tons by 2031.117 However, a slow recovery in electricity generation could potentially undermine these growth prospects, underscoring the critical need for sustained energy sector reforms.118
Positive news emerged in April 2025 as Moody’s upgraded Zambia’s economic outlook from stable to positive.119 Moody’s also affirmed its long-term local- and foreign-currency issuer ratings and senior unsecured ratings at Caa2, recognizing the nation’s ongoing fiscal consolidation and debt-restructuring efforts.120
Zambia’s growth opportunities
The mining sector, a long-standing cornerstone of Zambia’s economy, is poised to be a major catalyst for economic growth in 2025 and beyond, fueled by both increased greenfield and brownfield (building new projects from the ground up versus upgrades to preexisting projects, respectively) investments within the sector.121
First Quantum Minerals’ US$1.25 billion Kansanshi S3 expansion project,122 expected to be completed by mid-2025, involves expanding the smelter and tailings dams, as well as constructing a new processing plant. This expansion is projected to boost copper production by over 200,000 metric tons annually. Besides, the US$600 million Sinomine Kitumba mining project,123 launched in August 2024, is anticipated to produce approximately 50,000 metric tons of copper, which will boost Zambia’s copper production once completed and fully operational.
Furthermore, the consistent and predictable mining tax framework,124 along with the resolution of challenges at the Konkola and Mopani copper mines, will bolster Zambia’s economic growth prospects and play a vital role in achieving the target of 3 million metric tons of copper production by 2031. In 2024, Zambia achieved its highest copper production since 1994, reaching 823,000 metric tons.125
The agricultural sector is expected to be a significant driver of Zambia’s economic recovery in 2025 and subsequent years, contributing substantially to the 6% average economic growth rate forecast for 2025 to 2027. This growth will be supported by the government’s policy initiatives aimed at transforming the Farmer Input Support Programme and the Sustainable Agriculture Financing Facility, both designed to enhance efficiency and improve targeting of farmers within the sector. Additionally, the launch of Bayer’s US$36.4 million maize seed facility positions Zambia as one of the leading maize producers in Africa.126
To reduce reliance on hydropower, stabilize the national energy balance, and bolster economic growth, Zambia has initiated key measures in the energy sector. Improved access to electricity, a crucial factor for economic expansion, will be supported by projects such as the 300-megawatt Maamba Energy Limited Phase II power plant expansion,127 slated for completion in 2026, and various solar power projects launched, aiming for a combined output of 1,000 megawatts.
Furthermore, the development of interconnectors, including the US$292 million Zambia-Tanzania-Kenya Interconnector128 by Zambia Electricity Supply Corporation Limited and the US$250 million Kalumbila-Kolwezi Interconnector project by Enterprise Power Zambia Limited, is underway.129
Key risks to Zambia’s outlook
Inflationary pressures in Zambia remain elevated and persistent (at 15.3% in May 2025), surpassing the Bank of Zambia’s single-digit target range of 6% to 8% (figure 10).130 This is largely driven by rising food and fuel costs, further exacerbated by the weakening of the kwacha against major foreign currencies.
The Bank of Zambia projects that inflationary pressures will ease in 2025 and 2026,131 mainly due to an expected decline in market prices for maize and crude oil. A forecasted bumper maize harvest of 3.6 million metric tons for the 2024-to-2025 farming season (a significant increase from the drought-induced 1.5 million metric tons in the 2023-to-2024 season), an anticipated rise in crude-oil supply, and weak global demand, all point to reduced oil prices.132
The Zambian kwacha has experienced a sustained decline in value over the past several years, reaching an average exchange rate of 28.01 per US dollar toward the end of April 2025.133 This depreciation is primarily attributed to a constrained supply of foreign exchange and significant demand pressures. These pressures have been intensified by the need for substantial food and energy imports, a situation worsened by reduced electricity generation stemming from the drought of 2023 to 2024.
To curb inflation and prevent further depreciation of the kwacha, the central bank has implemented several key measures, including tightening monetary policy, notably by maintaining the base lending rate at 14.5% in May 2025.134 Additionally, the Bank of Zambia raised the statutory reserve ratio on two occasions: first, to 17% in November 2023,135 and then, to 26% in February 2024,136 further reinforcing its commitment to a tighter monetary stance.
As of the end of December 2024, Zambia’s external debt stock reached US$15.4 billion, an increase of 6% from the US$4.6 billion recorded at the end of December 2023.137 This rise is attributed to ongoing disbursements from the IMF under the Extended Credit Facility arrangement, and from other multilateral development banks, primarily directed towards social sector projects.
Significant progress has been made in Zambia’s US$13.3 billion external debt–restructuring process, with 90% already addressed.138 This includes US$6.4 billion covered by the Official Creditors Committee, US$3.8 billion under the Eurobond holders, and US$1.6 billion from other private creditors, which have already been restructured.139 The remaining 10%, pertaining to other private creditors, is still pending finalization, with negotiations underway. Overall, this progress in debt-restructuring is expected to establish a foundation for greater economic stability and improved growth prospects.
However, the recent introduction of 17% trade tariffs140 on all imports from Zambia by the US government is anticipated to negatively impact the country’s economy, mirroring the effects on many other nations. These tariffs are expected to lead to a decline in global trade volumes. If production costs and consumer prices rise in the United States due to tariffs, disruptions in established value chains are likely to occur. This, in turn, can potentially dampen overall US economic activity, consequently reducing demand for exports from African countries such as Zambia. Furthermore, essential capital goods that Zambia imports from the United States are also expected to become more expensive as a result of trade tariffs, weighing down on consumers.
Regional economic outlook for East Africa
East Africa’s economic outlook for 2025 presents growth opportunities amid a dynamic global economic landscape. The countries discussed in this outlook are expected to see growth fueled by sectors like agriculture, infrastructure, mining, tourism, and digital innovation. Strategic investments in transport and energy, coupled with the development of oil and mining industries, are set to enhance regional integration and export potential.
But, despite positive trends, the region also faces challenges, including inflationary pressures, debt, currency volatility, and political uncertainties, which could temper growth prospects. But countries like Ethiopia and Zambia are leveraging debt-restructuring efforts and international financial support to seek fiscal relief and enable greater public investment.
Overall, East Africa remains on track for growth, with governments and private sector players leveraging trade, technology, and resource development to drive economic transformation. The outlook underscores East Africa’s resilience and adaptability as it navigates global headwinds and pursues growth and prosperity for its people.
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BY
Tewodros Sisay
The author would like to thank Faiza Mgua, Mundia Mwanambuyu, Metti Jotte, Ebtihal Pritam, Kapasa Mwale, Ian Mugambi, Dawit Tirago, Faith Munge, Whitney Osoro, Brandon Mwangi, and Luke Amolo for their contributions to this piece.
Cover image by: Rahul Bodiga
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