NAIROBI, KENYA - Kenya is negotiating with China to convert a $5 billion Standard Gauge Railway (SGR) loan from U.S. dollars to Chinese yuan, a move aimed at easing debt repayment pressures but one that raises deeper questions about Africa’s economic sovereignty.
The loan, contracted nearly a decade ago for the Nairobi–Mombasa railway, remains Kenya’s single largest infrastructure debt. Repayments in U.S. dollars have grown costlier as the shilling continues to weaken against the greenback, inflating annual servicing costs. The Treasury estimates that currency depreciation alone has added billions of shillings to the repayment burden.
File photo shows a train of the Mombasa-Nairobi Standard Gauge Railway (SGR) is seen at the Mombasa Railway Station in Mombasa, Kenya, on June 1, 2018
The proposal mirrors a growing trend across Africa, where governments are diversifying repayment options to counter dollar volatility. Yet analysts caution that the move could deepen dependence on Beijing.
China is already Kenya’s largest bilateral lender, holding about one-third of the country’s external debt. Beyond the SGR, Beijing has financed major road, energy, and port projects, making its role central to Nairobi’s infrastructure ambitions. Critics argue that this reliance amounts to “debt diplomacy,” with Chinese loans buying influence alongside development.
The SGR itself has faced scrutiny. Once hailed as a transformative corridor for trade, it has struggled to generate revenue sufficient to cover operating costs, let alone repayments. In 2022, the Auditor General reported that the line had run persistent losses, fueling criticism over its long-term value.
Kenya’s talks in Beijing are being closely watched across the continent. Countries such as Zambia, Ghana, and Ethiopia have all sought debt restructuring from China in recent years, highlighting how African borrowers are recalibrating their partnerships with the world’s second-largest economy.
For Nairobi, the stakes go beyond railway repayments. The outcome will signal how African nations navigate the tightrope between fiscal relief and geopolitical dependence and whether debt diplomacy can be turned into a strategy for economic resilience rather than vulnerability.