Ethiopia and Kenya have become the first African countries to adopt yuan-based debt-swap arrangements, marking a major shift in the region’s financial strategy as both seek relief from the burden of dollar-denominated debts. The move reflects growing interest among African economies to diversify foreign exchange exposure and strengthen economic ties with China a key lender and trade partner.
Both nations announced that parts of their Chinese debts will now be repaid in yuan instead of dollars, a decision expected to reduce currency volatility and ease pressure on foreign reserves. Kenya’s Treasury said $3.5 billion of its bilateral debt to China will be restructured under the new framework, while Ethiopia confirmed talks with China Eximbank and the People’s Bank of China to swap part of its $5.38 billion debt into yuan.
Analysts, however, warn that the success of such arrangements will depend heavily on the volume of African exports to China. Mentoria Economics Chief Economist Ken Gichinga noted that while short-term gains may come from reduced interest costs, long-term sustainability hinges on strengthening trade with China to generate sufficient yuan inflows.
The International Monetary Fund recently classified Ethiopia’s debt as “unsustainable,” citing weak export performance and missed Eurobond payments. Kenya, too, faces rising debt service costs due to a strong dollar and shrinking foreign inflows.
Despite these concerns, the shift underscores Africa’s growing embrace of de-dollarization and economic diversification. The Chinese yuan now accounts for about 5% of Kenya’s foreign reserves, while the U.S. dollar remains dominant at nearly 60%. Over the past decade, China has become Africa’s largest trading partner, with bilateral trade hitting $296 billion in 2024.
China is also expanding its Cross-Border Interbank Payment System (CIPS), a yuan-based alternative to the U.S.-led SWIFT network. The system now connects over 1,600 financial institutions across 120 countries, including several African banks through partnerships with Chinese correspondents. In June 2025, Afreximbank and South Africa’s Standard Bank Group joined as direct CIPS participants.
Experts say this trend reflects a broader geopolitical realignment. “The world is becoming more multipolar,” Gichinga explained. “Countries want options beyond the dollar system, and the rise of the yuan offers diversification and resilience.”
Egypt, Zambia, Nigeria, and South Africa are reportedly exploring similar yuan-based trade and debt frameworks, signaling a deepening shift in Africa’s monetary future one that could redefine how the continent engages in global finance.