Kenya just swapped a dollar debt to China into yuan, cutting the loan cost from 6% to 3%. This brought a major relief to Kenya. “The East African nation paid 37.5 billion shillings ($290.7 million) to the Export-Import Bank of China for a semi-annual installment due in January, according to Controller of Budget Margaret Nyakang’o. That compares with 59 billion yuan it paid in the same period last year,” Bloomberg reported this week. The loan was used to finance a railroad project. Additionally, China extended two of the maturities to 15 years, including a four-year grace period.
Kenya’s main creditors are the World Bank ($15.2 billion) and Euro bond investors (€7.9 billion). Debt toward China is less than $4.8 billion. According to sources, the final rate on IMF loans is between 3.4% and 5.2%, while the interest rate on Euro bonds is between 8% and 10%.
Other African countries might follow Kenya’s example. Bloomberg reports: “Ethiopia is in talks to convert part of the $5.38 billion it owes Beijing into yuan as it restructures debt after defaulting on $1 billion of eurobonds. Zambia, the first African country to default after the pandemic, is following suit and has allowed Chinese mining companies to pay taxes in yuan. Sri Lanka defaulted in 2022 and last year announced it would take a yuan-denominated loan equivalent to $500 million for a highway project.”
