Kenya converts $3.5bn China Exim railway loans into yuan, saving $215mn annually
Kenya has converted a $3.5 billion loan from China Exim Bank for the Mombasa-Nairobi railway into yuan. This shift is expected to save the country $215 million annually in debt repayments by mitigating foreign exchange risks and facilitating trade with China.
Kenya has completed the conversion of three dollar-denominated loans from the Export-Import Bank of China into yuan, a move expected to save the country approximately $215mn annually, Reuters reported. That represents about 0.2% of Kenya's GDP or nearly one-fifth of its 2025 external debt-service bill.
Kenya's Treasury said the switch aims to hedge against US dollar volatility and align repayment flows with Chinese import and project spending, which are largely yuan-denominated. “It kicks off immediately, and it is a saving in our fiscal space,” Finance Minister John Mbadi told reporters on October 7.
Kenya remains heavily exposed to the US dollar, with about 68% of its external debt denominated in greenbacks. Public debt stood at around 70% of GDP by mid-2025, above the government's 55% medium-term target, though officials say risks are easing amid stronger revenues and refinancing of costly obligations. A $2bn Eurobond maturing in June 2026 underscores the need to secure concessional funding and sustain investor confidence.
The currency swap shifted floating, dollar-based interest rates on the three China Exim Bank facilities into their lower yuan equivalents, immediately reducing near-term debt-service costs. The lender has not publicly commented on the currency conversion, which forms part of Kenya's wider debt-management discussions with Beijing.
The three tranches formed part of roughly $5bn borrowed in 2014–15 to finance a modern railway line from the port city of Mombasa to Naivasha; the outstanding balance was about $3.5bn by June 2024. The loans financed Kenya's Standard Gauge Railway (SGR), a flagship Belt and Road project that has faced scrutiny over cost overruns and limited freight uptake.
Kenya joins several African economies, including Zambia and Ethiopia, in exploring yuan-denominated or hybrid repayment frameworks with Chinese lenders to reduce forex risk and smooth debt-service profiles.
Asbne IntelliNews reported, to ease pressure on public finances, Nairobi has revised its debt-management strategy, including a plan to generate $4bn by securitising a 2% levy on imports, which yields about KES 50bn ($387mn) annually. Proceeds from the levy will help finance the planned extension of the China-built railway to Kisumu and Malaba, near the Ugandan border, and upgrades to Nairobi's main airport.
A team from the International Monetary Fund is currently in Kenya for talks on a new Fund-supported programme after the previous one expired in April. A new programme could unlock additional concessional funding and reassure investors amid elevated 2026 Eurobond maturities.
“We need the IMF,” the finance minister is quoted as saying by Reuters. “Yes, our economic conditions have improved, but we must not lose sight that we need more concessional loans, and they come from multilaterals like the IMF and the World Bank.”
As bne IntelliNews reported, the mission, which runs until October 9, is the first step in negotiating an agreement that could provide Kenya with both policy support and concessional lending to ease pressure from rising external repayments.
Analysts expect the IMF's new facility, if secured, to emphasise revenue mobilisation, state-owned enterprise reforms, and transparent debt disclosures — key elements of Kenya's medium-term fiscal anchor.
Kenya is expected to outline additional refinancing measures in its 2026–28 debt strategy, including options for local-currency bond issuance and public–private infrastructure financing.
