Kenya is in talks with China to convert a dollar-denominated loan for its flagship railway into Chinese yuan, an aide to Finance Minister John Mbadi said on Wednesday.
The loan financed construction of the $5 billion Standard Gauge Railway linking the port of Mombasa to Nairobi, one of the country’s largest infrastructure projects. The 480-km line was built by Chinese contractors under Beijing’s Belt and Road Initiative.
China is Kenya’s biggest bilateral lender, and the railway forms a significant portion of that debt. Officials say shifting the loan into yuan would lower servicing costs.
Bloomberg reported earlier that the switch could save money because Chinese interest rates remain below U.S. rates. Converting the loan would align Kenya’s payments with China’s domestic borrowing conditions.
Kenya has been under pressure to manage its debts. The IMF has classified the country as at high risk of debt distress. Public debt has risen sharply in recent years, with the debt-to-GDP ratio drawing concern from creditors and development partners.
Last year, the government’s attempt to raise taxes triggered deadly protests, forcing a retreat. Since then, Nairobi has been seeking other ways to create fiscal space. Debt restructuring, rather than new revenue measures, has become a priority.
The railway is central to Kenya’s modernization plans, aimed at cutting transport costs and boosting trade. But it has faced criticism over cost overruns and doubts about economic viability.
Chinese officials did not immediately respond to requests for comment. The talks reflect China’s expanding financial role in Africa, where infrastructure lending remains a cornerstone of economic cooperation.
