Kenya revives China-financed SGR extension to Malaba, converts railway debt to yuan

Kenya has restarted construction on the long-delayed extension of its Chinese-built Standard Gauge Railway (SGR) to the Ugandan border at Malaba, six years after Beijing curtailed the infrastructure lending that had halted the project near Naivasha.

President William Ruto broke ground on the Naivasha–Kisumu section at Narok on 19 March 2026; two days later, on 21 March, he was joined by Uganda's President Yoweri Museveni in Kisumu for a separate ceremony launching the connecting Kisumu–Malaba phase, according to CNBC Africa and Kenyan press coverage. China Road and Bridge Corporation (CRBC) and China Communications Construction Company (CCCC) — both Beijing-based, state-owned contractors — were awarded the construction tender, reported at roughly KES 700 billion (about US$5.4 billion), Kenyans.co.ke reported.

Separately, on a different timeline, Kenya's Treasury converted about $3.5 billion of existing SGR loans owed to the Export-Import Bank of China from US dollars into yuan. Treasury Cabinet Secretary John Mbadi said the move would cut annual debt-servicing costs by $215 million, according to bne IntelliNews and reporting picked up by Yahoo Finance.

Six years of delay

The first phase of the SGR, from Mombasa to Nairobi, opened in 2017 and was later extended to Naivasha, largely financed by Exim Bank of China loans taken out in 2014–15. China sharply cut infrastructure lending to Africa from around 2019, according to the China-Global South Project, leaving the line more than 350km short of Uganda and turning the stalled project into a frequently cited example in "debt-trap" criticism of Chinese lending — a characterisation Beijing has rejected. Kenya and China renegotiated terms around a 2024 Beijing summit that favoured investment-style structures over pure sovereign lending, and Exim Bank of China signalled willingness in May 2024 to fund the Malaba extension.

A different financing model

Unlike the original SGR, which relied on Exim Bank sovereign loans, the extension combines a public-private partnership structure with revenue securitisation, according to the China-Global South Project and Eastleigh Voice. Kenya's Treasury has projected the section will cost KES 502.9 billion, with about KES 455.35 billion sought from foreign investors and a securitised bond of up to KES 390 billion, partly backed by a railway development levy on cargo estimated at roughly KES 35 billion (about $270 million) a year. Kenya's National Assembly approved a KES 14 billion supplementary allocation in March 2026, raising the financial year's SGR budget to KES 30 billion, Eastleigh Voice reported, as land compensation began along the route. Cost estimates for the project have varied between outlets, from about KES 500 billion to KES 700 billion, reflecting different scopes and reporting dates.

Debt swapped into yuan

The yuan conversion, first reported around October 2025, covers three Exim Bank of China facilities drawn from roughly $5.08 billion originally borrowed for the SGR's first two phases, Business Daily reported. It roughly halves the interest rate — from about 6.37% under the dollar loans to close to 3%, Mbadi said. Kenyan outlets have reported slightly different savings figures: Soko Directory put the annual saving at KES 22 billion in July 2026, while Business Daily's KES 27.8 billion figure roughly matches Mbadi's $215 million figure at prevailing exchange rates, leaving Soko Directory's lower figure an outlier that may reflect a different reporting date, a narrower loan base, or an error. The swap has pushed the dollar's share of Kenya's external debt below 50% for the first time in 11 years, to 44% (about KES 2.37 trillion), while the yuan's share has risen to 21% (KES 1.13 trillion), Business Daily reported, citing Treasury data.

Reaction

Analysts described the swap as financially rational. Nairobi-based geoeconomic analyst Aly-Khan Satchu said converting to yuan at a lower interest rate "made optimal sense from a balance sheet management perspective." Yufan Huang, a China-Africa Research Initiative fellow at Johns Hopkins University, called it "a win-win-win for Kenya, China Exim and the Chinese gov't," while Ovigwe Eguegu, a policy analyst at Development Reimagined, said the swap lets Kenya "avoid US dollar volatility" while keeping access to Chinese financing — comments carried in reporting picked up by Yahoo Finance. The deal fits a wider pattern: China has signed yuan currency-swap deals with African governments including Nigeria and South Africa, and analysts say debt-strained borrowers such as Ethiopia and Zambia have similar incentives to explore yuan or hybrid repayment arrangements with Chinese lenders, part of Beijing's push to internationalise the renminbi.

What happens next

Chinese Vice-President Han Zheng visited Kenya days after the groundbreaking, as part of a three-nation Africa tour — Kenya, South Africa and Seychelles — running from 22 to 30 March 2026. Construction on the Naivasha–Kisumu–Malaba corridor is reported to have commenced in July 2026, with the Kisumu section expected to be completed by July 2027, Kenyans.co.ke reported. Kenya's National Land Commission issued a gazette notice on 10 September 2026 for the compulsory acquisition of more than 300 land parcels along the 370km corridor, and a further notice on 25 September covering the earlier Nairobi–Naivasha section. Uganda has begun construction of its connecting section to Malaba, pursuing separate World Bank financing, while the Democratic Republic of Congo has said it wants to join the corridor to link Mombasa port to central Africa, Eastleigh Voice reported.