Kenya Converts SGR Loan From China Into Yuan to Cut Interest Costs
Kenya has converted its Standard Gauge Railway (SGR) loan from China into Yuan, marking a major shift in the country’s debt management strategy aimed at reducing interest costs and easing pressure on the shilling.
Treasury Moves to Ease Dollar Pressure
Treasury Cabinet Secretary John Mbadi announced on Tuesday, October 7, 2025, that the government had completed the conversion of the Ksh646.15 billion (USD 5 billion) loan from U.S. dollars to Chinese Yuan.
The shift will save the country approximately Ksh27.78 billion (USD 215 million) annually in interest payments, according to estimates shared by Reuters.
“This decision will significantly ease Kenya’s debt repayment burden while protecting our foreign reserves from further strain,” Mbadi told financial journalists during a briefing on the country’s debt position.
The Treasury noted that the conversion will help Kenya manage its repayment schedule more sustainably, while reducing exposure to rising dollar-based interest rates.
Part of Broader Global Shift Away From the Dollar
Kenya’s move mirrors a broader global trend, as several developing nations diversify their foreign reserves away from the U.S. dollar. By denominating part of its external debt in Yuan, Kenya joins a growing number of African countries deepening financial cooperation with China.
Analysts say the shift will reduce the country’s need to buy large amounts of dollars to meet repayment obligations — a move expected to strengthen the Kenyan shilling and ease pressure on the foreign exchange market.
Background of the SGR Loan
Kenya borrowed about USD 5 billion (Ksh646.2 billion) from China in 2013 to finance the construction of the Standard Gauge Railway (SGR) — one of the continent’s largest Chinese-funded infrastructure projects.
Repayments have been a significant part of Kenya’s external debt burden, with rising global interest rates and a weak shilling worsening repayment costs in recent years.
Debt Restructuring and Fiscal Reforms
The conversion is part of a wider government strategy to restructure debt and restore fiscal stability. The International Monetary Fund (IMF) and investors have repeatedly warned that Kenya faces a high risk of debt distress if repayment obligations remain dollar-heavy.
Last year, the government’s attempt to raise taxes through the controversial Finance Bill 2024 sparked nationwide protests, forcing President William Ruto to withdraw some fiscal proposals.
Since then, Treasury has explored alternative ways to create fiscal space, including renegotiating loans and pursuing local-currency debt options.
Economists say the Yuan conversion is a practical step toward reducing Kenya’s debt vulnerability while improving confidence among investors and lenders.
