Kenya has secured an annual saving of approximately $250 million (Ksh32.3 billion) after converting its $5 billion Standard Gauge Railway (SGR) loan from the Export-Import Bank of China into yuan, in a move that could reshape the country’s external debt management strategy.
According to a report by Bloomberg, this strategic shift marks a significant milestone in Kenya’s ongoing efforts to ease pressure on its debt-laden economy and reduce exposure to the volatile U.S. dollar.
“Presently, our debts are so concentrated in one currency — in dollar terms,” said Treasury Secretary John Mbadi. “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.”
Diversifying Kenya’s Debt Portfolio
The conversion forms part of a broader plan to diversify Kenya’s external debt portfolio and strengthen fiscal resilience. It also signals the growing international influence of the Chinese yuan, as more developing nations turn to Beijing for alternative financing models amid global currency fluctuations.
Kenya initially borrowed the funds to build the SGR linking Mombasa to Nairobi. As of June 2024, about $3.5 billion of that debt remained unpaid, with Kenya spending roughly $1 billion annually on Chinese loan repayments.
China fines Kenya Sh. 1.3 billion for SGR loan default
Treasury data shows that the country’s total external debt stood at $40.5 billion as of March 2025, with $14.4 billion 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 projected to make up nearly a quarter of external debt servicing in the fiscal year ending June 2025.
Debt Restructuring and Fiscal Reforms
The yuan conversion aligns with Kenya’s broader debt restructuring agenda, which includes extending maturities on foreign obligations and easing short-term repayment pressures. The government recently refinanced three eurobonds to extend their tenors, albeit at higher interest costs, and is negotiating a $1 billion debt-for-food swap supported by the U.S. International Development Finance Corporation.
Additionally, Nairobi plans to issue a diaspora bond worth between $250 million and $500 million, targeting up to $3.8 billion in total funding from Kenyans abroad, according to Prime Cabinet Secretary Musalia Mudavadi.
Kenya’s total external debt redemptions amount to about $26 billion, with annual interest payments of roughly $1.5 billion.
Talks with IMF and Budget Constraints
Discussions with the International Monetary Fund (IMF) are ongoing for a new funding programme. Mbadi confirmed the talks are “progressing well,” adding that IMF engagement helps maintain fiscal discipline.
Kenya’s fiscal space remains constrained following the 2024 withdrawal of proposed tax hikes amid widespread protests. The government continues to face challenges from unpaid supplier arrears, recurrent spending pressures, and external debt obligations linked to large infrastructure projects.
A Step Toward Financial Stability
By shifting part of its loan obligations into yuan, Kenya is not only reducing its exposure to the U.S. dollar but also positioning itself strategically in an evolving global financial landscape where currency diversification and bilateral debt management are becoming critical.
This move could serve as a blueprint for other African economies seeking to rebalance their external debt portfolios, strengthen currency resilience, and restore investor confidence.
As Kenya recalibrates its fiscal strategy, the conversion stands as both a symbol of economic pragmatism and a signal of shifting global financial alignments — a calculated step toward long-term financial stability.
