Germany has agreed to cancel Kenya’s Sh. 8.4 billion (€60 million) debt, but with a condition. According to the National Treasury’s Annual Borrowing Plan for the Financial Year 24/25, the debt forgiveness requires Kenya to allocate funds to specific climate resilience projects.

In a debt-for-climate swap agreement, Kenya will be required to finance the remainder of the loan into climate action activities. This is part of Germany’s broader initiative to address climate change.

“In 2024, Germany also participated in a debt swap program, converting €60 million for similar development purposes,” the document read in part.

Kenya’s financial load will be significantly lessened and the country will make strides in directing funds towards renewable energy and sustainable farming, concentrating on climate adoption.

The Sh. 8.4 billion will be spent over several years to reduce the impacts of climate change and reduce carbon footprint. The success of Kenya’s climate action projects will determine the degree to which Germany forgives Kenya’s remaining debt.

Of the amount, Sh. 4.4 billion is expected to go toward the development of the Bogoria-Silali Block geothermal field in a bid to expand Kenya’s renewable energy capacity and increase output to the national grid.

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The remaining funds will be directed toward climate adaptation initiatives in agriculture and upgrading rural infrastructure to improve farmers’ market access and increase youth employment in climate-resilient industries.

The setup is a win-win situation for both countries. Kenya reduces debt on its books while supporting global climate agendas while Germany intensifies its relationship with Kenya whilst advancing its climate goals.

In 2006, Italy became the first country to waive Kenya’s loan in another debt swap program which saw around Sh. 3.5 billion redirected into development spread over 10 years.