Kenya is negotiating with China to convert part of its dollar-denominated debt into yuan and extend repayment timelines, in a move aimed at easing the country’s strained public finances, Treasury Secretary John Mbadi said.
The talks, which focus largely on loans that financed the $5 billion standard-gauge railway between Mombasa and Nairobi, could significantly cut Kenya’s annual debt servicing bill to China—currently around $1 billion.
“The moment we move from US dollars to renminbi, automatically the interest rate reduces by almost half,” Mbadi said in an interview in Nairobi on Wednesday. “To us, that is a big saving.”
Kenya owed about $40.5 billion in external debt at the end of March, Treasury data show. Of that, $14.4 billion was owed to the World Bank, $7.52 billion to eurobond investors, and $5.04 billion to China. The Export-Import Bank of China, Kenya’s primary bilateral lender, is expected to account for roughly a quarter of the nation’s external debt payments in the fiscal year ending June 2025, according to a parliamentary report.
Kenya, which the International Monetary Fund classifies as being at high risk of debt distress, has been scrambling to ease repayment pressures since 2024, when widespread protests forced President William Ruto’s administration to abandon unpopular revenue-raising measures.
The government has been struggling with weaker-than-expected tax revenues, rising loan repayments, and mounting arrears to contractors and suppliers. Expenditure carryovers from previous fiscal years have also added to the strain.
“That’s because of some decisions that were taken on huge infrastructural developments, which gobbled quite a huge chunk of money, almost exclusively funded through external borrowing,” Mbadi said.
Kenya is also considering other measures to reprofile its obligations, including a possible repurchase of $3.5 billion worth of local-currency bonds, Bloomberg previously reported.
The discussions with China are expected to conclude soon, Mbadi said, without giving a precise timeline.
