Kenya has renegotiated the terms of three Chinese loans used to finance its Standard Gauge Railway (SGR), extending the repayment period to 2040 in a move aimed at easing heavy debt-servicing pressures, the Treasury said.
Under the revised agreement, the loans have been restructured into a new 15-year facility starting this year, alongside a fresh five-year grace period during which Kenya will not be required to repay the principal.
The loans, originally denominated in US dollars, were converted into Chinese yuan as part of the renegotiation. The Treasury said the changes are expected to save the country about US$215 million (27.7 billion shillings) annually by reducing foreign exchange and interest-rate risks.
Kenya had previously been required to repay both principal and interest on the SGR loans by 2035.
The East African nation borrowed US$5.08 billion (655 billion shillings) from the China Export-Import Bank in the financial year ending June 2015 to construct the SGR linking the port city of Mombasa to Nairobi, later extended to Naivasha.
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The loans were initially scheduled to mature between January 2029 and July 2035, with Kenya making semi-annual interest payments in January and July.
The National Treasury now projects that annual servicing costs for the SGR loans will fall to about 37 billion shillings, down from an earlier estimate of 50 billion shillings.
Kenyan officials said the decision to switch repayments from dollars to yuan was also driven by concerns over the country’s heavy exposure to dollar-denominated debt. According to official data, about 52 percent of Kenya’s external debt was in US dollars at the end of September, compared with 27.9 percent in euros, 12.3 percent in yuan, 5.2 percent in Japanese yen and 2.5 percent in British pounds.
President William Ruto’s economic adviser, David Ndii, said multilateral lenders had raised concerns that Nairobi was using dollar loans to service Chinese debt rather than fund domestic development.
Kenya’s total public debt stands at more than 12 trillion shillings about 70 percent of gross domestic product prompting the government to pursue restructuring and refinancing strategies to make repayments more sustainable.
