Kenya has officially converted its multi-billion shilling Standard Gauge Railway (SGR) loan from the U.S. dollar to the Chinese Yuan in a strategic move aimed at cutting interest costs and easing pressure on the local currency.
According to Treasury Cabinet Secretary John Mbadi, the government completed the currency conversion of the Ksh646.15 billion (USD 5 billion) loan earlier this week, allowing the country to benefit from lower interest rates tied to the Yuan. The move is expected to save Kenya an estimated Ksh27.8 billion (USD 215 million) annually.
“The conversion aligns with global economic trends as nations diversify from dollar-based obligations to reduce currency and interest exposure,” Mbadi said during a media briefing on October 7, 2025.
Kenya initially signed the SGR financing deal with China in 2013, marking one of the largest infrastructure partnerships under Beijing’s Belt and Road Initiative in Africa. The loan financed the construction of the modern railway linking Mombasa and Nairobi, a project that remains a cornerstone of Kenya’s transport network.
By shifting repayment from the dollar to the Yuan, the Treasury hopes to stabilize the shilling and reduce demand for U.S. currency in the local market — a factor that has often contributed to exchange rate volatility. Financial analysts believe the move will also strengthen Kenya’s foreign exchange reserves by reducing the need to purchase large volumes of dollars for debt servicing.
“Reducing Kenya’s dollar dependency will enhance the stability of the shilling, improve import cover, and attract investor confidence,” said an economist at the Central Bank of Kenya.
The government’s latest strategy comes amid growing global momentum toward de-dollarization, as several developing nations adopt local or alternative currencies in trade and debt repayments.
Kenya’s shift also reflects its broader fiscal realignment efforts after months of economic strain and public protests over tax reforms. Following the suspension of the contentious 2024 Finance Bill, President William Ruto’s administration has turned to debt restructuring and currency diversification as part of a long-term plan to restore financial sustainability.
Economists view this move as a bold yet necessary step toward reducing debt distress risks while maintaining crucial diplomatic and financial ties with China — Kenya’s biggest bilateral lender.
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Kenya has converted its Ksh646 billion SGR loan from U.S. dollars to Chinese Yuan to reduce interest payments and ease pressure on the shilling. The Treasury says the move will save Ksh27.8 billion annually and strengthen foreign reserves.
