The share of Kenya’s foreign loans in yuan has more than doubled to 11.7 percent after converting three standard gauge railway (SGR) dollar-denominated loans to the Chinese currency as nations explore alternatives to expensive greenback-linked financing.

The value of yuan-denominated external debt jumped 142.4 percent to Sh665.15 billion in the year to June, growing its share from five percent a year earlier, Treasury data shows.

This surge pushed the yuan ahead of the Japanese yen, which saw its share fall to 4.5 percent from 5.2 percent.

The US dollar remained the main currency for Kenya’s external debt at 54.8 percent or Sh3.1 trillion, but its share dropped from 59.8 percent in June 2025 following the swaps to yuan.

The US dollar remains the dominant currency for bilateral lending to developing economies.

The shift has helped Kenya move from floating, dollar-based interest rates across the three SGR loans from China Exim Bank to lower, yuan-based rates, saving the country billions of shillings on interest payments.

Apart from the financial relief, Kenyan officials linked the currency switch to the fact that the nation's debt is concentrated in dollars, exposing the government to higher currency and interest rate risks.

The share of euro-dominated loans also slipped from 27.3 percent to 26.6 percent and stood at Sh1.51 trillion in June. The changing structure of Kenya's foreign debt profile mirrors the flow of trade and loans between Beijing and Nairobi.

China is Kenya’s largest source of imports, and the nation has in the past decade emerged as the biggest bilateral provider of loans.

Kenya converted three Chinese railway loans from dollars into yuan, alongside longer maturities and extra grace periods, cutting its debt-service costs by about Sh27 billion a year.

The conversion drew interest from at least five other African and Asian nations, an AidData study found, in a sign debt-laden borrowers are exploring alternatives to expensive dollar-linked financing.

Ethiopia, Mozambique, Zambia, Pakistan and Indonesia were among countries that could seek Kenya-style changes to the terms of Chinese loans, according to the report, as Beijing also pushes broader use of the renminbi in cross-border lending.

Nations seeking to convert debts to China should consider that such a switch is not risk-free, with borrowers still having to secure Chinese currency when payments are due.

Kenya’s public debt reached 68.5 percent of GDP to Sh11.1 trillion in June, reflecting the borrowing binge for infrastructure projects that has seen the country commit over 40 percent of its taxes for loan repayments.

→ jwaweru@ke.nationmedia.com

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