Kenya has opened talks with China to ease the cost of servicing its loans by converting part of its dollar-denominated debt into yuan, John Mbadi, the country’s Treasury Secretary said on Wednesday.
The plan, which could slash interest costs by nearly half, also seeks to restructure repayment terms and ease pressure on public finances.
China is Kenya’s largest bilateral lender, with repayments amounting to about $1 billion annually.
“The moment we move from US dollar to renminbi, automatically, the interest rate reduces by almost half,” Mbadi said. “To us, that is a big saving.” He noted that the talks were advancing but gave no timeline for conclusion.
Railway loans in focus
The discussions are centred on loans from the Export-Import Bank of China that funded the $5 billion standard-gauge railway, Kenya’s biggest infrastructure scheme since independence.
The line connects the port of Mombasa to Nairobi and extends to Naivasha.
Servicing these loans is expected to account for roughly a quarter of Kenya’s external debt obligations in the year to June 2025.
Treasury data show Kenya’s external debt stock at $40.5 billion in March, including $14.4 billion owed to the World Bank, $7.52 billion to eurobond holders, and $5.04 billion to China.
While Beijing has not confirmed the talks, its Foreign Ministry said it would continue to “promote practical cooperation with Kenya and other African countries,” Bloomberg reports.
Strained fiscal outlook
Kenya’s finances remain under pressure, with the government facing revenue shortfalls, rising arrears to suppliers and heavy debt obligations.
In May, the World Bank warned that the East African nation was on the verge of defaulting on its debts.
Political unrest has compounded the strain: nationwide protests in 2024 forced President William Ruto to abandon new tax measures, leaving a wider financing gap.
To shore up liquidity, the government is preparing a diaspora bond worth between $250 million and $500 million, part of a broader programme to raise as much as $3.8 billion, according to Musalia Mudavadi, the nation’s Prime Cabinet Secretary
Relief from China would offer much-needed breathing space, but the outcome of the talks remains uncertain at a time when investor sentiment toward Kenya is fragile.
