{UAH} Why Kenya wants to switch to Chinese yuan

Why Kenya wants to switch to Chinese yuan

By Otiato Guguyu | Friday, Nov 25th 2016 at 22:25

The National Treasury wants to start borrowing directly in Chinese and other foreign currency to reduce reliance on the dollar.

Kenya whose largest creditor is China, accounting for 57 per cent the country's total external debt of $4.51 billion, has over 56 per cent denominated in dollars.

This means when Kenya goes to borrow in China where it receives yuan, it wires the money through a bank that sells it dollars and does a similar conversions when making payments, incurring currency losses.
In the current Budget policy statement, Treasury has indicated that it wants to diversify the currency with which the country borrows, to safeguard the economy against exchange rate risks.

"On the external financing front, the Government will minimise the degree of foreign exchange rate risk exposure associated with the external debt portfolio by adopting a deliberate approach in diversifying currency structure so as to hedge against exchange rate risks especially to new loan commitments," the Budget Policy reads.

According to an April 2015 budget report, the stock of Kenta's debt was denominated 56.8 per cent in dollars, 22.3 per cent in Euros, 9.6 per cent in Japanese Yen, 5.5 per cent in Great British Pound and only 4.4 per cent in Chines Yuan.

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