Kenya is set to save about $250 million annually after successfully converting its $5 billion railway loan from the Export-Import Bank of China into yuan, marking a major step in easing pressure on the country’s debt-laden finances, bloomberg reported.
- Kenya successfully converted a $5 billion railway loan into yuan, saving approximately $250 million annually.
- The strategic move diversifies Kenya’s external debt portfolio and reduces reliance on the U.S. dollar.
- The conversion reflects China’s growing currency influence among developing nations seeking financial stability.
- Kenya continues restructuring its debt and pursuing innovative financing avenues to manage its fiscal challenges.
The new gain comes amid growing uncertainty over Washington’s engagement with African economies and persistent fluctuations in global interest rates, which have increased the cost of dollar-denominated borrowing.
The country’s Treasury Secretary, John Mbadi, confirmed the development, describing it as part of a broader strategy to diversify the country’s external debt portfolio and strengthen fiscal resilience.
The East African nation had borrowed the funds to build the Standard Gauge Railway (SGR) linking the port city of Mombasa to a town outside Nairobi. However, only $3.5 billion of the debt remained unpaid as of June 2024, according to the Treasury’s debt register, with Kenya spending roughly $1 billion each year repaying Chinese loans.
Also read: Kenya’s deepening ties with China ruffle feathers in the U.S.
Reducing Exposure to the US Dollar
The shift from dollar to yuan payments comes as part of a broader plan to reduce exposure to the US currency and spread foreign borrowing risks.
“Presently, our debts are so concentrated in one currency, in dollar terms,” Mbadi said in Nairobi. “We are trying to spread that risk by diversifying currencies. That is why we approached the Chinese government to convert some of the debts that are in dollars to renminbi.”
The successful conversion underscores the growing international use of China’s currency among developing nations seeking cheaper financing and relief from exchange rate volatility.
Although Mbadi did not disclose the new interest rates or repayment terms under the yuan arrangement, he confirmed that plans for a panda bond were suspended due to “unfavourable rates.”
Kenya’s External Debt Profile
According to Bloomberg, Kenya is classified by the International Monetary Fund (IMF) as being at “high risk” of debt distress, with external debt standing at $40.5 billion as of March 2025.
Of this, $14.4 billion is owed to the World Bank, $7.52 billion to eurobond investors, and $5.04 billion to China.
Payments to the Export-Import Bank of China alone are expected to account for about a quarter of external debt servicing in the fiscal year ending June 2025.
Debt Restructuring and New Financing Plans
Beyond the yuan deal, Kenya is reorganising both domestic and foreign borrowings to ease repayment pressures and extend maturities that had been clustered over the next decade.
The country needs about $26 billion for external debt redemptions, alongside $1.5 billion in annual interest payments.
It has refinanced three eurobonds to extend their tenors, albeit at higher costs, and is arranging a $1 billion debt-for-food swap backed by guarantees from the US International Development Finance Corporation.
Additionally, Nairobi plans to issue a diaspora bond worth between $250 million and $500 million, with an overall target of raising up to $3.8 billion from Kenyans abroad, according to Prime Cabinet Secretary Musalia Mudavadi.
Also read: China and Kenya strengthen ties amid global turmoil
Talks with IMF and Fiscal Pressures
Mbadi said talks with the IMF for a new funded programme were “very good and progressing well,” with a mission team currently in Nairobi. “Engaging with the IMF has benefits,” he said. “At times they may sound like a nuisance, but you also need someone to continuously engage with you and ensure you stay on track.”
Kenya’s fiscal space remains tight following the government’s decision to drop planned tax hikes amid mass protests in 2024.
The administration of President William Ruto continues to grapple with arrears to suppliers, carryover spending, and the heavy burden of external borrowing for infrastructure.
A Move Toward Financial Stability
By converting part of its Chinese loans to yuan and diversifying its borrowing sources, Kenya hopes to stabilise its finances and navigate an increasingly complex global debt environment.
