The loan in question was used to fund Kenya’s $5 billion Standard Gauge Railway (SGR), one of the country’s most ambitious infrastructure projects. China, Kenya’s largest bilateral lender, provided the financing, which has contributed significantly to the nation’s external debt stock.
Bloomberg News, which first reported the development earlier on Wednesday, noted that such a conversion could potentially save Kenya money by tapping into lower borrowing costs in China compared to the United States, where interest rates have remained high.
Kenya has come under increasing pressure from investors and multilateral lenders such as the International Monetary Fund (IMF), who warn that the country remains at “high risk of debt distress.” Servicing external debt has strained government finances, with dollar repayments weighing heavily on the shilling and exacerbating inflationary pressures.
Last year, the government’s attempt to increase tax revenues as part of a broader fiscal reform plan triggered widespread protests that turned violent, forcing authorities to reverse some of the measures. Since then, Nairobi has been exploring alternative strategies to create fiscal space without sparking fresh political unrest.
Analysts say that shifting to yuan-denominated debt could shield Kenya from the volatility of the U.S. dollar, while also aligning more closely with China’s growing role in Africa’s financial systems. However, critics caution that it may deepen Kenya’s economic dependence on Beijing, raising concerns about long-term sovereignty over strategic assets.
Chinese authorities have yet to publicly comment on the loan conversion talks.
For Kenya, the move underscores a broader trend among developing economies to diversify away from dollar-denominated debt, particularly at a time when U.S. interest rates remain elevated and external financing costs are rising.
Do you want me to frame this as a straightforward economic news report (like Reuters/Bloomberg) or lean more towards a geopolitical analysis piece that explores the wider implications of yuan adoption in Africa?