Kenya Sees Relief as Debt Payments to China Drop

By Robai Ludenyi

Kenya’s financial pressure eased slightly after the country recorded a significant reduction in the amount it paid to Chinese lenders last year. New Treasury figures show that repayments to China declined by more than Sh23 billion, offering the government a small but important break as it continues to manage rising public debt and tight budget conditions.

Treasury data shows that in the financial year ending June 30, 2025, Kenya paid Sh129.35 billion to Chinese lenders. This is Sh23.33 billion less than the Sh152.69 billion paid in the previous financial year ending June 2024. The decrease marks the first time since the 2020/2021 pandemic period that Kenya’s repayments to China have gone down.

The drop is largely linked to two key factors a stronger and more stable Kenyan shilling and lower global interest rates. Together, these changes reduced the cost of servicing loans that Kenya took from China to finance large infrastructure projects.

Out of the total amount paid, Sh88.61 billion went toward repaying the principal, which is the actual borrowed money. This figure represents an 11.8 percent decline compared with the previous year. Meanwhile, interest payments dropped sharply by 21.99 percent, falling to Sh40.74 billion from Sh52.20 billion.

Most of the repayments went to the Export-Import Bank of China, the institution that financed the construction of Kenya’s Standard Gauge Railway (SGR) and several other major infrastructure developments.

The loans are denominated in US dollars and carry floating interest rates, meaning the rate can change depending on global financial conditions. The rates were set at either 3.0 percent or 3.6 percent above the London Interbank Offered Rate (Libor), which for years was used worldwide as a benchmark for lending. However, Libor was discontinued in June 2023 and replaced by newer reference rates such as the Secured Overnight Financing Rate (SOFR).

SOFR, which reflects the cost of borrowing using US Treasury securities as collateral, dropped to about 4.32 percent in January 2025, down from 5.32 percent during the same month a year earlier. Lower interest rates like this reduce the cost of servicing loans.

The performance of the Kenyan shilling also played a key role. Between July 2024 and January 2025, the currency averaged 129.87 shillings against the US dollar, a significant improvement compared with 149.52 shillings per dollar during the same period a year earlier. A stronger shilling makes it cheaper for the government to repay dollar-denominated loans.

Kenya’s borrowing from China increased sharply during the administration of former president Uhuru Kenyatta, when the government financed large projects such as roads, bridges, power plants, and the Standard Gauge Railway in an effort to boost economic activity and create jobs.

However, Kenya has not signed a new loan agreement with China since 2019. The last deal involved funding for the Konza Data Centre and Smart City facilities worth about $166.7 million (Sh21.67 billion) and another $83.3 million (Sh10.83 billion) for the Kenya Power Transmission Expansion Project.

But Kenya’s large stock of Chinese loans means the country will continue sending billions of shillings to Beijing each year for the foreseeable future.

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