Kenya has successfully converted its $5 billion Standard Gauge Railway (SGR) loan from the Export-Import Bank of China from U.S. dollars to Chinese yuan, a move expected to save the country about $215 million in annual interest payments. The landmark agreement, confirmed by Finance Minister John Mbadi, is part of a broader effort to reduce the burden of external debt and strengthen fiscal stability, as reported by Reuters.
The switch to yuan-denominated repayments comes after years of pressure from rising global interest rates linked to dollar benchmarks. Under the previous terms, Kenya paid over 6 percent interest on the SGR loan, compared to about 3 percent under the yuan arrangement, Business Daily Africa highlighted. The adjustment marks a major milestone in Kenya’s debt management strategy, aimed at easing repayment costs and mitigating exchange rate volatility.
“This is an important step in stabilizing our fiscal outlook,” Mbadi said, noting that the move would free up resources for infrastructure investment and debt servicing. He emphasized that the currency shift will also reduce Kenya’s exposure to fluctuations in the U.S. dollar, which has increased borrowing costs for several African economies.
Analysts have welcomed the decision as a prudent measure that could enhance Kenya’s credit standing and support long-term economic resilience. However, they caution that maintaining fiscal discipline and negotiating similar debt relief arrangements will be crucial to ensuring lasting impact, given that Kenya’s external debt remains close to 70 percent of GDP, Reuters reported.
