Nairobi Climbs 13 Places on Cheapest Cities for Expats List

The depreciation of the Kenyan shilling against major world currencies has resulted in increased salaries for expatriates and a more affordable cost of living in Nairobi.

The currency has experienced a decline in strength, resulting in a record low of Sh147.36 per dollar, a decrease of 19.4% in comparison to January’s numbers. This situation has resulted in an increase in international employee salaries in the region, specifically for those working in UN organizations, diplomatic groups and prominent international businesses. However, the inflation rate for Kenya has fallen for the third consecutive month and remains at a significant low point – measured officially at 6.7%. This is presently the lowest point the inflation has been in 17 months.

The current situation favours expatriates over locals who have experienced pay cuts due to inflation. According to Mercer Cost of Living ranking 2023, Nairobi has enhanced its position by 13 places and is now the 173rd most expensive city, in contrast to its earlier score of 160. Their ranking is based on over 200 commodities, such as housing, transportation, food, clothing, household goods, and entertainment.

According to Mercer, the desirability of various cities for expats is influenced by fluctuations in exchange rates and inflation rates. Stears, which specializes in data analytics, predicts that foreign exchange inflows will decrease while global interest rates will increase, dragging Kenya’s shilling value against the US dollar. As a result, the gap between expats’ earnings and locals’ earnings in Kenyan shillings is predicted to grow larger. One positive effect that expatriates may experience, on the other hand, is protection from rising inflation in establishments like malls, restaurants, and safari lodges where they frequently spend money.

As per the Economic Survey conducted by the Kenya National Bureau of Statistics, entities and organizations from outside the country have the highest average monthly income in the region. The average monthly wage earned by such external segments in 2020 was Sh313,084, which is an increase from Sh263,611 observed merely five years earlier. In the private sector, the financial services industry provides the second-best average monthly income to its employees paying up to Sh173,506. Despite offering high salaries, the number of foreigners coming to work in Kenya has witnessed no significant changes, as 19,305 work permits were issued and renewed last year — compared to 18,917 issued in 2017.

Fluctuations in currency exchange rates can greatly affect international workers’ purchasing power, but those who benefit the most from the weakening local currency are those whose expenses are local. On the other hand, those who remit their dollars back home to pay for mortgages and school fees are not as advantaged.

The exchange rate also plays a role in pay negotiations for international employees, where a weaker shilling can lead to lower dollar salaries for incoming expatriates. Employees who are paid in Kenyan shillings have been walloped by new tax measures, such as a 1.5 per cent housing levy on gross pay and the doubling of value-added tax on fuel, which is likely to increase the cost of living.