Kenya to pay highest contribution to EAC budget in proposed new model

The East African Community (EAC) has long been hailed as a beacon of regional integration, with its aspirations for a common market, monetary union, and a political federation. However, the bloc’s progress has been consistently hampered by a persistent and deep-seated challenge: a chronic financial crisis stemming from its funding model. For years, the EAC has grappled with significant budget deficits as member states routinely default on their financial obligations. A new hybrid financing model has been proposed, representing a significant strategic pivot aimed at curing these perennial defaults and ensuring the long-term sustainability of the Community. This essay will analyze the rationale behind this new model, its potential impact on member states, and its broader implications for the future of East African integration, arguing that while it offers a pragmatic solution to a decades-old problem, its ultimate success will depend on sustained political commitment and genuine fiscal responsibility from all partner states.

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The Financial Foundation and Its Cracks

The financial woes of the EAC are not a recent phenomenon. For many years, the Community operated under a system where each member state was required to make an equal contribution to the budget. This formula, while seemingly fair on the surface, failed to account for the vast economic disparities among the partner states. The Treaty for the Establishment of the East African Community stipulates in Article 132 (4) that the budget “shall be funded by equal contributions by the Partner States,” a provision that has been the source of both solidarity and strife. The original three members—Kenya, Uganda, and Tanzania—shared a more or less comparable economic standing when the Community was revived in 1999. However, the subsequent accession of Rwanda, Burundi, South Sudan, and most recently, the Democratic Republic of Congo (DRC) and Somalia, introduced a wide spectrum of economic capacities.

The “one size fits all” approach placed a disproportionately heavy burden on the smaller economies, which often struggled to meet their financial commitments due to limited fiscal capacity and a host of competing domestic priorities, including healthcare, education, and national security. This resulted in a vicious cycle of arrears, budget deficits, and a stalled operational agenda. The provided news report highlights the severity of the problem, noting that for the 2024/25 financial year, only $32 million had been paid out of a $56 million target. The EAC Secretariat’s financial struggles were so dire that staff salaries for July 2025 went unpaid, a clear signal that the existing funding mechanism was no longer viable and a new approach was desperately needed.

Unpacking the Hybrid Model: Equity and Sustainability

The solution, which was agreed upon by the Heads of State at their 23rd Ordinary Summit in November 2023, is a hybrid financing model designed to address these fundamental inequities. The new formula is a two-part approach: 65 percent of the budget will be funded by equal contributions from all member states, while the remaining 35 percent will be an “assessed contribution.” This assessed portion is calculated based on each partner state’s average nominal GDP per capita for the preceding five years, as determined by the World Bank. This is a crucial element, as it ties a portion of the financial burden to a country’s economic strength and capacity to pay.

The impact of this shift is immediately evident in the proposed contributions. As the news article notes, Kenya, East Africa’s largest economy, will see its annual contribution increase from the previous equal share to an estimated $12.1 million, accounting for nearly a quarter of the total annual budget. In contrast, smaller economies like Burundi and South Sudan will contribute significantly less under the new formula, with their assessed portions being lower than their equal-share contributions. The logic here is clear: those who are more economically capable should contribute more to the shared enterprise, while those who are still developing can benefit from a reduced financial strain. This new model is a pragmatic attempt to balance the principle of shared ownership with the reality of economic disparities, aiming to provide a more sustainable and predictable source of funding for the Community’s operations and programs.

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Economic Disparities and the Case for the Reform

A closer look at the economies within the EAC reveals the stark differences that the new model seeks to address. Kenya has long been the economic engine of the region, boasting a diversified economy with strong sectors in finance, technology, and agriculture. Tanzania and Uganda have also shown strong growth, particularly in recent years, but their economic structures and per capita incomes differ from Kenya’s. On the other hand, countries like Burundi and South Sudan have faced significant developmental challenges, often battling with political instability, high poverty rates, and a reliance on subsistence agriculture. The recent entry of the DRC, a massive country with a rich but largely unharnessed economy, and Somalia, which is still in a rebuilding phase, further complicated the existing equal-contribution model. The new formula recognizes these realities. By using nominal GDP per capita as a metric, the model ensures that the financial burden is distributed more equitably. This approach is not merely about charity; it is about strengthening the entire bloc by allowing less economically developed members to remain viable partners, thereby sustaining the momentum of regional integration.

The EAC’s financial challenges have often been a mirror for its political and economic health. A lack of stable funding means that essential projects—such as the development of regional infrastructure, the harmonization of customs procedures, and the implementation of the East African Monetary Union roadmap—are often delayed or completely stalled. The reform of the budget model is, therefore, not just an accounting exercise; it is a vital step toward restoring faith in the Community’s institutions and demonstrating a renewed commitment from member states to the integration project. The fact that the proposal has been brought before the East African Legislative Assembly (Eala) and the Council of Ministers, with a total budget of $109.3 million for the 2025/26 financial year already tabled, shows that the political will to implement this change is present.

Implementation, Challenges, and the Road Ahead

While the proposed hybrid model is a promising development, its success is by no means guaranteed. The original news report indicates that the model will be reviewed after three years of its implementation. This trial period is crucial and will test whether the new formula can genuinely cure the problem of poor remittances. A key challenge will be ensuring that all member states, including the larger contributors like Kenya, consistently meet their new, higher financial obligations. The minister, Mr. Mudavadi, admitted that Kenya would make an “additional contribution of $3.6 million,” a figure that, while modest in the context of a national budget, must be consistently paid. A failure to do so would undermine the entire purpose of the new model and push the Community back into a state of financial precarity.

Furthermore, the integration of new members like the DRC and Somalia presents its own unique set of challenges. The article notes that the EAC is still assessing their contributions, which will need to be carefully calculated to ensure they are both fair and realistic. The success of this new model will depend on a shift in mindset from partner states, moving away from a nationalistic approach to budget contributions and embracing a more collaborative, long-term vision for the region. The financial stability offered by the hybrid model could be the catalyst that allows the EAC to finally deliver on its core promises of a prosperous and integrated East Africa, paving the way for the realization of the Common Market and the eventual Monetary Union.

In conclusion, the proposed hybrid model for the East African Community’s budget is a pragmatic and necessary reform. By moving away from a rigid equal-contribution system, it directly addresses the economic realities of the region’s diverse member states. It is a bold step toward ensuring financial stability and, by extension, the operational effectiveness of the Community. While challenges in implementation and sustained political will remain, this new model provides a solid framework for the EAC to overcome its perennial funding woes. If successfully implemented, it will not only resolve a long-standing financial crisis but also breathe new life into the ambitious project of East African integration, offering a blueprint for how a regional bloc can adapt its governance to foster equitable growth and shared prosperity for all its members.

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By: Montel Kamau

Serrari Financial Analyst

12th August, 2025