Kenya significantly reduced its annual repayments to Chinese lenders in the financial year ended June 2026 after restructuring debt linked to the Standard Gauge Railway (SGR), providing much-needed relief to the country’s strained public finances.
Treasury data shows that Kenya paid Sh107.74 billion to Chinese creditors during the 2025/26 financial year, a decline of Sh21.61 billion from the Sh129.35 billion repaid in the previous year. The latest figure is also Sh44.95 billion lower than the record Sh152.69 billion paid in the 2023/24 financial year, marking the second consecutive annual decline in repayments after debt servicing peaked.
The reduction follows a landmark agreement between Nairobi and Beijing to restructure three major SGR loans. Under the deal, Kenya converted the loans from US dollar-denominated debt into the Chinese renminbi while extending repayment periods and securing additional grace periods.
The restructuring is expected to ease annual debt obligations by replacing floating interest rates linked to the Secured Overnight Financing Rate (SOFR) with fixed interest rates denominated in renminbi. This shields Kenya from high US interest rates that had significantly increased the cost of servicing the railway loans over the past two years.
The lower repayment burden comes at a critical time as the government seeks to reduce pressure on the national budget while maintaining funding for development projects and essential public services. Debt servicing has remained one of the largest expenditure items in recent years, limiting fiscal space for infrastructure, healthcare, education and social programs.
The restructuring also reduces Kenya’s exposure to fluctuations in the US dollar, which had amplified repayment costs as the shilling weakened against the greenback.
While the agreement provides immediate relief, Kenya continues to carry substantial external debt, with China remaining one of its largest bilateral lenders due to financing for flagship infrastructure projects such as the SGR.
The decline in repayments signals that Kenya has moved beyond the most demanding phase of servicing its Chinese infrastructure loans, offering the Treasury greater flexibility as it works to strengthen public finances and manage the country’s overall debt burden.
