Kenya has opened talks with China to convert a $5 billion railway loan from US dollars into Chinese yuan, according to government officials and financial sources familiar with the discussions. The loan was secured initially to fund the Standard Gauge Railway (SGR), one of the country’s largest infrastructure projects.

The government’s proposal seeks to reduce debt servicing costs by shifting repayment from dollars to yuan, as Chinese interest rates remain lower than those in the United States. Analysts say the conversion could ease fiscal pressure on Kenya, which the International Monetary Fund and global investors currently classify as being at high risk of debt distress.

In recent months, Kenya has faced mounting economic challenges, including public backlash against tax increases that triggered nationwide protests and forced the government to withdraw some measures. President William Ruto’s administration is now pursuing alternatives to create financial breathing space while managing its external debt obligations.

The SGR, constructed by Chinese contractors and funded largely through loans from China’s Exim Bank, has been a flagship project in Kenya’s development strategy. However, the heavy debt burden attached to it has drawn criticism from both local and international observers.

China has not publicly commented on the ongoing discussions. Should Beijing approve the conversion, analysts suggest it could set a precedent for other African nations with similar loan structures while also deepening the yuan’s role in Africa’s financial systems.