Kenya has converted its $5 billion railway loan from China into Chinese yuan, a rare currency shift aimed at easing mounting debt servicing costs, Reuters reported. The move is expected to save the government about $215 million annually in interest payments.

The currency swap covers a loan contracted in 2013 from the Export-Import Bank of China to build the Standard Gauge Railway linking Mombasa to Nairobi. Finance Minister John Mbadi said the transition takes effect immediately, noting that the change will free up fiscal space by lowering dollar-based interest charges that had grown increasingly burdensome.

The decision reflects broader concerns over Kenya’s exposure to dollar-denominated liabilities, which have become more expensive amid a strong US currency and tighter global credit conditions. By shifting to yuan, Nairobi hopes to stabilise repayments while deepening financial ties with Beijing, its largest bilateral lender.

Market observers see the move as part of a wider trend among emerging economies seeking to diversify funding away from the dollar to mitigate exchange-rate risk and reduce borrowing costs. Yet, analysts warn that yuan-linked obligations may carry their own volatility and could further entrench Kenya’s dependence on Chinese financing.

Kenya’s debt to China has long drawn scrutiny, particularly over transparency and the potential use of national assets such as the Mombasa port as collateral. The yuan conversion, while offering near-term relief, revives debate over the sustainability and structure of Kenya’s external borrowing strategy.