September 6, 2025
Kenya has announced plans to restructure its multibillion-dollar debt to China by switching repayments from US dollars to Chinese yuan. The move, described by analysts as a “win-win,” could reduce Nairobi’s debt-servicing burden while advancing Beijing’s push to expand the global use of its currency.
If finalized, the arrangement would mark a precedent-setting step in Africa’s financial landscape—potentially rewriting the rule book on how debt restructuring with China can be managed while reducing reliance on the dollar in East Africa.
Halving Interest on Chinese Loans
Kenya’s Treasury confirmed in late August that talks with the Export-Import Bank of China were at an advanced stage. The plan involves converting dollar-denominated loans into yuan and extending repayment maturities.
The loans in question—secured in 2014 and 2015 for the Standard Gauge Railway (SGR)—amounted to about US$5 billion (35 billion yuan). The railway links Mombasa port with Nairobi and includes a 120km extension into Naivasha.
Under the restructuring, interest rates would fall from over 6 percent in dollar terms to roughly 3 percent in yuan, reflecting lower Chinese financing costs. Kenya’s Treasury Minister John Mbadi said this could halve the current 6.37 percent rate tied to US-dollar loans, providing significant relief to the country’s strained budget.
Boost for China, Breathing Space for Kenya
Kenya spends more than US$1 billion annually servicing its Chinese debt, and this deal could ease that pressure. It also helps China accelerate its long-standing goal of promoting the yuan as an international trade and settlement currency.
“Kenya diversifies its borrowing profile and gets breathing space, while China gains another foothold for the yuan in Africa,” said Aly-Khan Satchu, a sub-Saharan Africa geoeconomic analyst. “It is indeed a win-win.”
The timing is critical. Nairobi has struggled with ballooning debt obligations, especially after widespread protests forced the government to cancel its 2024 Finance Bill and withdraw planned tax hikes. The International Monetary Fund (IMF) has already classified Kenya as being at high risk of debt distress and recently suspended the final review of its programme, freezing access to nearly US$850 million in funding.
Wider Implications for the Horn of Africa
Kenya’s pivot could have regional consequences. By aligning debt repayment with yuan, Nairobi may set a precedent that other Horn of Africa countries could follow, especially Ethiopia and Djibouti—nations already heavily engaged with Chinese financing for infrastructure.
For Beijing, it strengthens its hand in Africa’s financial architecture, reducing dollar dominance in trade and lending. For Nairobi, it provides breathing room to redirect resources to pressing domestic needs, including job creation and development.
This strategic shift is more than just a debt swap—it signals a potential realignment in Africa’s financial future, one that could ripple across the Horn of Africa and beyond.