- Kenya wants to change its Standard Gauge Railway (SGR) loan from U.S. dollars to Chinese yuan.
- The move is to reduce repayment costs and ease pressure on the economy.
- China funded the $5 billion SGR, Kenya’s biggest project since independence.
- Rising debt has left Kenya at high risk of financial distress.
- Talks are ongoing, but China has not yet commented.
Kenya is discussing with China the possibility of changing its SGR loan from dollar payments to Chinese yuan. Treasury officials believe this could help cut repayment costs since interest rates in China are lower than in the U.S.
China is Kenya’s largest lender, having financed the $5 billion SGR. However, paying back this loan has become a heavy burden. Both the IMF and global investors have warned that Kenya faces high risks of debt distress.
President William Ruto’s administration is trying new ways to stabilise finances. Last year’s tax hikes sparked deadly protests, forcing the government to roll them back. Now, Kenya is focusing on restructuring loans, borrowing at cheaper rates, and cutting spending.
China has not given an official response to the loan conversion plan. If approved, Kenya could reduce its exposure to the U.S. dollar and avoid the impact of rising American interest rates.
