Kenya’s outstanding debt to China is ending 2025 at its lowest level in eight years, as Beijing has sharply curtailed new lending to developing nations amid growing concerns over repayment risks and debt distress.
Treasury figures show outstanding borrowings from China stood at KSh620.3 billion (USD4.8 billion) at the end of September 2025 — the lowest since late 2017 — with repayments outpacing any fresh disbursements. No major new loans have been reported in the final quarter, confirming the projected year-end decline.
Lending surge reversal
The drop marks a dramatic reversal from the lending surge that began after former President Mwai Kibaki’s term ended, when Kenya owed Beijing just KSh61.2 billion, mostly in yuan for ICT and geothermal projects. Borrowing exploded under subsequent administrations, driven primarily by financing for the standard gauge railway, SGR, a flagship Belt and Road Initiative project.
In the 2014/15 fiscal year, Kenya secured KSh655 billion (USD5.08 billion) from China’s Export-Import Bank to build the modern railway from the port of Mombasa to Nairobi and later to Naivasha. The loans, initially in yuan before shifting to dollars, pushed total debt to China to a peak of KSh939.8 billion in December 2023.
The secretive terms of the SGR deals sparked legal challenges from activists seeking disclosure of contracts and studies. The project has since faced criticism over costs, underperformance and heavy repayment burdens.
China’s policy shift
China’s lending slowdown accelerated after the 2020 COVID-19 pandemic heightened default risks across the developing world. Beijing’s two main policy banks — China Exim Bank and China Development Bank — have adopted tougher terms, according to Financial Times reporting.
At the 2021 Forum on China-Africa Cooperation, President Xi Jinping announced a one-third cut in headline funding to Africa, redirecting resources from large-scale infrastructure to small and medium enterprises and green initiatives. The shift has left Beijing’s 2013 Belt and Road Initiative largely stalled in many countries, including Kenya, with little new debt financing available.
Impact on Kenya infrastructure
The freeze has directly affected the SGR, forcing Nairobi to seek alternatives for extending the line to the Ugandan border at Malaba. The Roads and Transport Ministry is planning a 15-year bond worth KSh390 billion, backed by securitised proceeds from the 1.5% Railway Development Levy on imports.
“From a cash flow perspective, it’s not enough to build the project within two or three years,” Roads and Transport Cabinet Secretary Davies Chirchir said.
China continues to engage in Kenyan infrastructure but through non-debt models. The 27-kilometre Nairobi Expressway operates as a public-private partnership, PPP, with China Road and Bridge Corporation, which recovers costs via tolls. Similar PPP arrangements cover the Rironi-Mau Summit Highway and the Talanta Stadium, the latter financed partly via a KSh44.7 billion bond.
Global trends and financing pivot
With Beijing stepping back as a lender, Kenya has turned increasingly to the World Bank Group and International Monetary Fund for external support, while new commercial borrowing serves mainly to refinance existing obligations.
The pattern echoes trends elsewhere in the developing world. A Lowy Institute study estimates developing countries will repay China USD35 billion this decade, including USD22 billion from the world’s 75 poorest nations. “China will be more of a debt collector than a banker,” the institute’s Riley Duke told Al Jazeera.
Debt restructuring details
The shift has raised Western concerns, prompting pressure on Kenya to convert dollar-denominated SGR loans to yuan. The move, involving roughly USD3.5 billion, came with concessions: a five-year extension of three key loans to 2040 (from 2035) and a four-year grace period.
The restructuring eases pressure at a time when debt servicing consumes more than half of government revenues. President William Ruto economic adviser David Ndii said in October that multilateral lenders were disturbed by the use of their funds to repay China instead of supporting domestic priorities.
“The Western lenders queried why they should be supporting us while other lenders are taking out money,” Ndii told Business Daily. “That’s why they put pressure on countries to restructure debts.”
Kenya’s debt to China is expected to decline further in coming years, as higher repayments continue and Beijing favours PPPs over traditional loans.
