KENYA – The situation for tea exported from Kenya to Pakistan has improved following the Pakistan government’s move to classify tea as an essential import commodity.
The move will boost Kenya’s export earnings from the tea industry after the Pakistan Central Bank approved the use of US dollars as the transaction currency in the tea business.
However, the biggest importer of Kenyan tea is grappling with a shortage of dollars that, for the past weeks, left 200 containers with 4.8 million kilograms of the beverage, worth Sh1.3 billion (US10m) held at the Port of Karachi.
The shortage of the currency has restricted banks from issuing traders the Letter of Credit, which is required before offloading.
Traders said the commodity held at the port caused a hit on sales back in Kenya, impacting negatively the prices.
The Pakistani traders are also unable to purchase more from Kenya as they lack Letters of Credit to issue to the sellers to guarantee the payment.
Pakistan chairman of Tea Association (PTA) Zeeshan Paracha, was quoted recently by the local media saying that prices would further go up if consignments stuck at the port are not released.
“PTA associations are facing problems in the clearance of documents due to dollar shortage in banks, resulting in holding the containers full of tea leaves at the port for the time being,” a media outlet in Pakistan quoted the official.
Nonetheless, the new law is promising to reverse the increasing tea prices in Pakistan that have climbed to Rs1,600 (Sh750) per kilo from Rs1,100 (Sh517) a month ago due to limited supply.
Pakistan imports over 50% of Kenyan Tea, making it Kenya’s largest trade partner in the tea sector. Agriculture and Livestock Development Cabinet Secretary Mithika Linturi has welcomed the new move, terming it a huge boost for the local economy and tea farmers.
“I’m excited to announce that our recent trip to Islamabad has borne fruits in barely three weeks. I wish to thank the Pakistani government for accepting our requests during the trip. The new policy will increase volumes of Kenyan tea export to Pakistan and increase our foreign exchange, leading to more earnings for our farmers,” said Linturi.
During his visit to Islamabad, Mr. Linturi noted the Ministry will put efforts into increasing the export of the beverage.
They include the establishment of Special Economic Zones (SEZ) in Mombasa to replace the current Export Promotion Zones (EPZ), a key flagship project under the Kenya Vision 2030 economic pillar.
According to Linturi, the SEZs may be a better scheme to circumvent challenges faced in the tea sector than the EPZs owing to numerous administrative, monetary, and tax incentives.
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