The persistent fall of the local currency has forced some landlords in Kenya’s major cities to start demanding for rent in US dollars.
This is after the local currency crashed to lows of Sh. 134 to Sh. 135 against the US dollar. It has emerged that landlords are asking to be paid using the green buck, with the alternative of increased rent fees to the equivalent of the prevailing market rate for the US dollar.
“There has been increased preference from landlords to have rent in dollar payments due to the ongoing depreciation of the Kenyan shilling,” property consultant Knight Frank said in its Kenya Market Update published on February 2.
Knight Frank acknowledged that there exists a mechanism built into the property leases which is allowing for payment in Kenya shilling terms but based upon the prevailing dollar rate.
“The main trend is we could end up having a two-tier market where there is a segment that is purely dollar-based and then a tier below based on the shilling,” Anthony Havelock, the Head of Capital Markets at Knight Frank Kenya told the media.
The Central Bank of Kenya has become totally helpless as the depreciation of the Kenya shilling escalates.
Currently, the official exchange rate that is quoted by the Central Bank of Kenya is over Sh. 124 to the dollar.
However, Kenyans are only accessing the US dollar at highs of Sh. 134 as the value of the local shilling deteriorates. The National Treasury, the CBK and the presidency has remained silent over the depreciation of the local currency, raising fears that the shilling’s depreciation is driven by manipulation.
This follows a pattern in which the shilling is losing close to one shilling against the dollar every two weeks to one month.
A number of mainstream banks are now selling the dollar at between Sh. 133 and Sh. 134. They are then buying the same at between Sh. 118 and Sh. 123.
By Thursday January 19, 2023, a local newspaper report showed that Stanbic Bank and Co-operative bank were selling the dollar at Sh. 133 and Sh. 134 per unit and buying it at Sh. 123 and Sh. 118.
On the other hand, Equity Bank was selling the dollar at Sh. 129 per unit and buying at Sh. 118 while Family Bank was selling the dollar at Sh. 129 per unit and buying at Sh. 126 per unit.
The majority of foreign exchange bureaus were buying the dollar at Sh. 129 and selling at Sh. 126.
Alarmingly, every time the shilling depreciates by one shilling to the dollar, Kenya’s external debt rises by Sh. 37 billion. This means that Kenya’s external debt servicing burden is going up by nearly Sh. 37 billion every month due to the shilling’s fall.