East African Economic Outlook: The Growing Weight of Debt

East Africa's economy is projected to grow steadily in 2025, led by Ethiopia and Kenya, but the region’s public debt levels reveal a pressing challenge that cannot be ignored. While impressive GDP numbers paint a picture of resilience, the rising debt burden tells a more nuanced story. Projections by IMF

Ethiopia and Kenya: Leaders in Growth, Contrasting in Debt

Ethiopia leads with a projected GDP of $120.913 billion, driven by industrial growth and infrastructure investments. Its 41.8% debt-to-GDP ratio reflects careful fiscal management, enabling growth without an excessive debt load.

Kenya, with a close GDP forecast of $116.662 billion, remains the region's economic hub, leveraging its diversified economy. However, its 72.4% debt-to-GDP ratio raises alarms.

This can be compared to “juggling knives—dazzling if done well but dangerous if mismanaged.” This highlights Kenya's high-stakes balancing act: borrowing for growth while ensuring debt remains sustainable.

The Heavyweight Contenders

1. Tanzania’s GDP of $85.477 billion and a moderate 46.3% debt ratio signal a stable outlook. Its investments in tourism and natural gas fuel its progress.

2. Uganda, with $62.917 billion in GDP and 50.3% debt, hopes oil exploration will reduce borrowing dependency.

   
   

The Debt-Burdened

1. Rwanda faces a 73.3% debt-to-GDP ratio with a modest GDP of $14.022 billion, reflecting ambitious infrastructure investments.

2. Burundi, at the lowest GDP projection ($2.154 billion), grapples with the highest debt ratio (80.4%), highlighting significant fiscal strain.

   
   

Challenges and Opportunities

Debt levels exceeding 70% of GDP, as seen in Kenya, Rwanda, and Burundi, pose risks of repayment struggles and reduced future borrowing capacity. Regional cooperation through initiatives like joint energy projects could mitigate these risks. Additionally, governments must prioritize inclusive policies to ensure growth benefits reach rural populations often left behind.

The Path Forward

As East Africa charges toward 2025, its economies face a critical question: Can they sustain growth without drowning in debt? While GDP numbers provide optimism, debt management, fiscal discipline, and regional collaboration will define whether the region’s promise becomes a reality.

The future holds potential, but only if these countries can turn their debt into an opportunity rather than a burden.