NAIROBI, Kenya – Kenya is negotiating with China to convert a multibillion-dollar railway loan from U.S. dollars into Chinese yuan in a bid to cut borrowing costs and ease pressure on its foreign exchange reserves.
John Mbadi, an aide to the Finance Minister, confirmed on Wednesday that discussions were underway, though details of the talks remain undisclosed.
China is Kenya’s largest bilateral lender and financed the construction of the $5 billion Standard Gauge Railway (SGR), one of the country’s most ambitious infrastructure projects.
Bloomberg News first reported the debt conversion plan, noting that Beijing’s lower interest rates compared to Washington could help Kenya save money at a time of mounting fiscal challenges.
Kenya has been under pressure from investors and the International Monetary Fund (IMF) over its rising debt burden, which analysts say has placed the country at a high risk of distress.
Last year, President William Ruto’s administration attempted to raise taxes to boost revenue but was forced to retreat after nationwide protests turned deadly.
The government has since been exploring alternative strategies to create fiscal space, including loan restructuring and external financing reforms.
Chinese authorities have not yet commented on the proposed loan conversion.
If approved, the move could deepen Kenya’s financial ties with Beijing while also diversifying away from reliance on the U.S. dollar for debt obligations.
However, economists warn that denominating debt in yuan could expose Kenya to new currency risks tied to fluctuations in the Chinese economy.
The Standard Gauge Railway, which links Nairobi to the port city of Mombasa, has long been at the center of Kenya’s debt debate, with critics arguing that the project’s revenues have fallen short of covering its financing costs.
