African nations face record borrowing costs. Kenya, Ethiopia, and peers struggle with debt sustainability and rising refinancing risks.

Africa Borrowing Costs Surge Across the Continent

African governments are paying some of the highest borrowing costs in the world, according to Bloomberg. Eurobond yields for several African sovereigns have reached double digits. Rising costs are putting pressure on fiscal balances across the continent.

Countries including Kenya, Ghana, Ethiopia, and Zambia face higher premiums than comparable emerging markets. Analysts warn that refinancing could become more challenging if global financial conditions remain tight.

Global Market Pressures Push African Debt Costs Higher

Africa’s borrowing costs are closely tied to global trends. The U.S. Federal Reserve has kept interest rates elevated, pushing capital toward safer assets. Investors demand higher returns to compensate for perceived risk.

Local currencies have weakened sharply. The Kenyan shilling, Ethiopian birr, Nigerian naira, and Egyptian pound have all depreciated. Dollar-denominated borrowing has become more expensive. Even fiscally stable governments are paying higher rates due to risk perception.

Recent debt restructurings in Zambia, Ghana, and Ethiopia have amplified investor caution. Bloomberg’s coverage shows even creditworthy countries face a premium.

Kenya’s Debt Challenges Remain Elevated

Kenya continues to face high borrowing costs. The government avoided a Eurobond default in 2024, but yields remain elevated. Analysts note Kenya is paying a “post-scare premium.”

Several Eurobond maturities are due before 2030. Weak currency and tight dollar liquidity increase costs. Debt service now consumes a larger portion of government revenue, reducing fiscal space for development projects.

East Africa Debt Risk Varies by Country

Uganda faces higher yields from delays in oil production and rising public spending. Tanzania has macroeconomic stability but investors demand more transparency on debt. Rwanda relies on concessional loans, but commercial borrowing is expensive. Ethiopia is still in restructuring negotiations, keeping yields elevated.

East Africa’s debt pressures are also linked to currency depreciation, current-account deficits, and global shocks. Analysts say fiscal consolidation is key to reducing the risk premium on African sovereign bonds.

Debt Sustainability Under Threat

High borrowing costs are crowding out spending on essential services. In some countries, debt service now exceeds spending on health and education. Infrastructure projects are delayed or scaled back.

IMF reports indicate more than 20 African countries are either in debt distress or at high risk. Governments with large foreign-currency debt are especially vulnerable. Analysts warn that sustained fiscal reforms are needed to prevent a new wave of debt crises.

Corporate and Banking Sector Impact

High sovereign yields affect banks and companies. Borrowing costs rise, compressing profit margins. Dollar-denominated loans become more expensive to service. Some firms delay expansion or switch to domestic markets, though rates remain elevated.

Steps to Rebuild Investor Confidence

Economists say African governments must adopt stricter fiscal discipline. Transparent debt reporting, improved revenue mobilization, and careful expenditure management are critical. Developing domestic bond markets can reduce reliance on dollars.

Regional currency stabilization would also help. Kenya, Nigeria, and Egypt are implementing IMF-supported reforms. Analysts emphasize that only visible, sustained reform will reduce borrowing costs.

Even if global interest rates ease in 2026, yields may remain high until investor confidence is restored.

IMF cautions Kenya and Ethiopia on currency risk from swapping U.S. dollar loans into yuan amid global rate pressures.

IMF Warns Kenya and Ethiopia on Currency Risks

The International Monetary Fund (IMF) warned on November 11, 2025, that Kenya, Ethiopia, and other emerging economies face potential currency risks as they convert U.S dollar dominated loans into Chinese yuan.The shift, part of a broader trend among developing nations, aims to ease debt servicing costs but may expose countries to new exchange rate vulnerabilities.

In its statement, the IMF noted that while these currency swaps may reduce immediate borrowing costs, they do not eliminate macroeconomic risks. “Countries must carefully weigh the short-term benefits of debt conversion against the longer-term challenges posed by currency fluctuations,” the IMF said.

The Mechanics of the Currency Swap

Kenya, like several African economies, has explored Chinese financing to fund infrastructure and development programs. Loans from China have traditionally been U.S. dollar-denominated, which exposes borrowers to fluctuations in the exchange rate between their local currency and the dollar.

By converting these loans into Chinese yuan, countries hope to stabilize debt payments, particularly as the U.S. dollar remains strong and interest rates high. However, the IMF warns that this approach introduces new risks tied to yuan volatility, international trade dynamics, and potential refinancing challenges if global conditions shift.

For Kenya, the move could ease pressure on the shilling, which has faced depreciation against the dollar in recent years. Analysts caution that reliance on yuan could make the country more sensitive to China’s monetary policy and capital flow regulations.

Regional Implications

The IMF highlighted that Kenya is not alone. Ethiopia, among other East African nations, has undertaken similar measures. The fund emphasized that while currency swaps can provide short-term relief, they do not replace broader economic reforms necessary for fiscal stability and debt sustainability.

Economist George Muchiri of the University of Nairobi said, “Converting loans to yuan might give temporary breathing room. But countries like Kenya must strengthen revenue collection, manage public spending, and maintain foreign reserves to avoid a future crisis.”

Global Context

The trend of dollar-to-yuan swaps reflects larger shifts in global finance. Many developing nations are increasingly considering alternatives to U.S.-denominated debt to reduce exposure to high interest rates. With the Federal Reserve maintaining historically high rates, emerging markets carrying significant dollar-denominated debt face growing debt service costs.

China, meanwhile, has actively promoted its currency in global finance. Yuan-denominated loans and bonds, sometimes referred to as “dim sum” debt, offer borrowers an alternative but carry their own geopolitical and market risks.

Potential Risks for Kenya

For Kenya, several risks accompany the decision to swap currencies:

1. Exchange Rate Exposure: If the shilling weakens against the yuan, debt servicing could still increase.
2. Refinancing Challenges: Yuan-denominated loans may be harder to restructure if global conditions change.
3. Policy Dependence: Kenya may become more sensitive to Chinese domestic financial policies and capital controls.

The IMF stressed that prudent debt management and transparent reporting remain critical to avoiding fiscal stress.

Balancing Benefits and Risks

Despite the warnings, converting debt from U.S. dollars to yuan can deliver tangible benefits. Lower interest rates and more predictable payment schedules can free up funds for infrastructure and social programs. For Kenya, this could mean more budget flexibility to invest in energy, transport, and industrialization projects that drive long-term growth.

The IMF urged governments to adopt a cautious, measured approach. Officials recommend regular stress tests, robust hedging strategies, and strong fiscal discipline to ensure currency swaps do not inadvertently worsen financial vulnerabilities.

Conclusion

Kenya’s decision to swap U.S. dollar loans into yuan illustrates the complex choices facing emerging economies in today’s volatile global financial landscape. While the move can reduce near-term debt pressures, IMF experts caution that it carries long-term currency and refinancing risks.

As Kenya continues to balance fiscal needs with market realities, policymakers must carefully monitor exchange rate trends and maintain robust economic safeguards. The IMF concluded:

“Currency conversion is a tool, not a solution. Countries must integrate it into a broader strategy for fiscal sustainability.”

Centum plans Kenya’s first dollar-denominated REIT worth $37M, boosting foreign investor confidence and deepening the country’s real estate market.

Kenya’s Centum Unit to Launch Country’s First Dollar-Denominated REIT

Kenya’s capital markets are on the brink of a historic milestone as Centum Investment Company Plc prepares to introduce the country’s first dollar-denominated real estate investment trust (REIT). The move underscores a growing appetite among international investors for Kenyan real estate and signals the country’s gradual transition toward globally aligned capital-market products.

A Landmark Move by Centum

According to Bloomberg News, Centum’s subsidiary — Two Rivers International Finance & Innovation Centre (Trific) — plans to issue a US $37 million REIT denominated in US dollars before the end of 2025.

The product will be the first of its kind in Kenya, marking a new phase of diversification within the Nairobi capital market. Centum’s Group Chief Executive James Mworia said the dollar-priced REIT aims to attract both local and international investors seeking predictable returns and protection from local-currency depreciation.

The instrument is expected to deliver an 8 percent annual return and will require a minimum investment of US $1,000, making it accessible to a wide range of investors.

Why This REIT Matters for Kenya

The launch of a dollar-priced REIT is more than a financial innovation — it’s a statement about Kenya’s evolving capital market. For years, Kenya’s real estate and investment sectors have been dominated by shilling-denominated instruments, which often deter foreign investors due to currency-exchange risk.

By pricing in US dollars, Centum’s REIT offers a hedge against shilling depreciation and provides an opportunity for investors to earn stable, foreign-currency returns from local assets. This could help deepen investor confidence, enhance market liquidity, and broaden the pool of foreign capital flowing into Kenya.

The initiative also aligns with the Capital Markets Authority (CMA) reforms that aim to expand alternative investment products, such as REITs, to support Kenya’s Vision 2030 development goals.

Key Features of Centum’s Dollar-REIT

The REIT will acquire a fully leased, revenue-generating commercial property located within Two Rivers Development — one of East Africa’s largest mixed-use projects, owned by Centum.

Market and Regulatory Implications

The launch of this REIT represents a breakthrough for Kenya’s capital-market innovation. However, it must first secure regulatory approval from the CMA, which has historically exercised caution in licensing new investment products to protect investors.

Experts believe this product could open the door for other foreign-currency-denominated instruments, helping diversify the Nairobi Securities Exchange (NSE) portfolio. In the long term, it could position Kenya as a preferred investment hub for East African property funds.

Still, challenges remain. Market analysts warn that property-valuation transparency, tenant creditworthiness, and macroeconomic headwinds — including inflation and high interest rates — could influence performance. Nevertheless, the REIT’s USD pricing significantly cushions investors from local-currency volatility.

Broader Economic Context

Kenya’s property market continues to attract institutional capital, thanks to rapid urbanization and rising demand for Grade-A commercial space. The country’s infrastructure development under projects such as Vision 2030’s Big Four Agenda and Nairobi’s affordable housing program has further boosted investor confidence.

According to data from Knight Frank Kenya, Nairobi remains one of Africa’s top destinations for high-yield commercial properties, with rental yields averaging 8 – 10 percent in prime zones. Centum’s dollar REIT is expected to capitalize on this demand while offering global investors an easy entry into Kenya’s real-estate market without direct currency exposure.

What It Means for Investors

For foreign investors, this REIT provides a stable entry point into an emerging market with high potential for real-asset growth. By earning returns in US dollars, investors mitigate the impact of local-currency depreciation — a major concern for global portfolios in frontier markets.

For local investors, the product encourages a new savings and investment culture that bridges domestic and global financial systems. As Centum sets the precedent, other developers may follow suit, introducing hybrid and offshore-linked instruments.

This will likely enhance transparency, improve reporting standards, and attract more institutional investors — such as pension funds and insurance companies — into Kenya’s real-estate sector.

A Step Toward Market Maturity

Kenya’s financial system has undergone steady reform since the 1990s, but REIT adoption has lagged due to low investor awareness and regulatory complexity. Centum’s initiative could shift perceptions by demonstrating how professionally managed, dollar-based instruments can deliver returns comparable to — or even surpassing — traditional real-estate projects.

As the Nairobi Securities Exchange seeks to boost listings and diversify revenue streams, such innovations could inject new vitality into Kenya’s investment landscape.

Conclusion

Centum Investment Company’s plan to introduce Kenya’s first dollar-denominated REIT marks a defining moment for the country’s capital markets. It reflects both confidence in Kenya’s economic fundamentals and a strategic move to align with international investment trends.

Once approved and launched, this US $37 million REIT could attract global investors seeking stable, dollar-linked returns in Africa’s most dynamic property market. More importantly, it signals Kenya’s readiness to compete in the international investment arena — one dollar at a time.