Kenya saved about US$167 million in debt servicing costs after converting part of its Chinese loans from U.S. dollars into yuan, easing pressure on public finances as the government grapples with a heavy debt burden, official data showed.
The savings followed a currency swap covering loans contracted from China Eximbank to finance the standard gauge railway linking the port of Mombasa to Naivasha, Budget Controller Margaret Nyakang’o said in data released on Feb. 2.
Under the new arrangement, Kenya repaid 37.5 billion shillings, equivalent to about US$290.7 million, to China Eximbank for a semiannual installment due in January. That compared with 59 billion shillings, or roughly US$457.4 million, paid during the same period a year earlier.
The reduction translated into savings of about US$167 million, largely reflecting lower exchange-rate costs after the loans were redenominated in yuan rather than dollars, according to Treasury and budget data.
Finance Minister John Mbadi said in October that Kenya had completed the conversion of the outstanding balances of three loans originally contracted in dollars from China Eximbank. The loans, with a combined original value of US$5 billion, were used to finance construction of the standard gauge railway, the flagship infrastructure project under China’s Belt and Road Initiative in Kenya.
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Analysts have described the railway as Kenya’s most expensive infrastructure undertaking since independence in 1963. While the project has improved cargo transport efficiency from the coast to the hinterland, it has also been a major contributor to the country’s rising debt servicing costs.
According to the latest Treasury figures, the outstanding balance of the loans subject to the currency swap stood at about US$3.5 billion in June 2024. By converting the debt into yuan, Kenyan authorities aimed to reduce exposure to dollar volatility and take advantage of more favorable repayment terms.
Beyond the currency conversion, Kenya and China also agreed to extend maturities on two of the railway loans. The revised terms stretch repayment periods to 15 years and include a four-year grace period, further easing near-term fiscal pressure.
Officials said the measures form part of a broader strategy to stabilise public finances as Kenya faces mounting debt obligations. Public debt is approaching 70 percent of gross domestic product, a level that has raised concerns among investors and multilateral lenders.
President William Ruto’s administration has adopted what it describes as a “proactive overall debt management strategy,” which includes lengthening repayment schedules, prioritising concessional borrowing and smoothing out large debt maturities.
Within this framework, Kenya has already refinanced three Eurobonds to spread repayments over a longer period, reducing the risk of sharp spikes in external debt servicing. The government has also opened discussions with the International Monetary Fund on a new support programme following the expiry of its previous arrangement in April 2025.
Kenya’s external debt stock totalled about US$41.7 billion at the end of September, according to Treasury data. Multilateral lenders accounted for the largest share, with the World Bank holding US$15.2 billion. Eurobond investors were owed US$7.9 billion, while China accounted for nearly US$4.8 billion.
The debt restructuring measures come amid broader efforts by African governments to renegotiate terms with major creditors as higher global interest rates, weaker currencies and slowing growth strain public finances.
In a related development, Ethiopia’s central bank governor said in October that Addis Ababa was negotiating with Beijing to convert part of its US$5.38 billion debt to China into yuan, seeking lower interest rates and reduced foreign-exchange risk.
Kenya’s experience could strengthen the case for similar arrangements elsewhere on the continent, as governments explore alternatives to dollar-denominated borrowing to manage exposure to currency swings and rising debt costs.
For Nairobi, officials say the yuan swap represents a practical step toward restoring fiscal space while maintaining strategic infrastructure links with China, even as the government seeks to rebalance its external financing mix toward cheaper and more flexible sources.
