Kenya has completed converting a $5 billion railway loan from China from dollars into yuan currency in order to save on interest payments, its Finance Minister John Mbadi said on Tuesday.
The conversion, which allows the higher dollar-based interest rates on the two tranche of the loan to drop into their lower yuan-based counterpart, will save the country about $215 million a year, Mbadi told reporters.
“It kicks off immediately and it is a saving in our fiscal space,” Mbadi said.
Apart from the financial relief, officials attribute the move to switch the currency of the loan to the fact that the East African nation’s debt is concentrated in dollars, exposing the government to higher currency and interest rate risks.
China is Kenya’s biggest bilateral lender, and the country took on the debt to construct a $5 billion high-speed railway, one of the country’s largest-ever infrastructure projects.
The standard gauge railway line was launched in May 2017 during the administration of Kenya’s fourth President Uhuru Kenyatta.
