Kenya is staring at a possible loss of foreign exchange earnings from tea as Egypt and Pakistan grapple with a serious scarcity of foreign currency in those markets that have seen shipping lines threaten to withdraw services, a move that will have serious ramifications on one of Nairobi's top exports.
Foreign ships, according to the Economic Times of India, want to pull out of Pakistan due to non-payment of freight charges as the banks fail to remit the money to shipping lines due to a dollar shortage.
The two countries account for 55 percent of Kenya's total tea exports.
Traders at the Mombasa auction are now worried that should the shipping lines pull out of Pakistan, the effects will be far-reaching to farmers and the country at large.
“Just last week we have witnessed very low demand from Pakistan buyers and if the shipping lines pull out as we have seen in the media reports, then we shall be in serious problems as a country,” said Peter Kimanga, a director with Global Tea Commodities.
The ship agents have warned the Pakistani government that services could come to a halt as foreign shipping lines are considering stopping their services for the country after banks stopped remitting freight charges to them due to the unavailability of dollars, Pakistan Ship's Agents Association chairman Abdul Rauf is quoted by local media.
In Egypt, where the country is grappling with a foreign currency crisis, the pound has slumped 35 percent against the US dollar since October last year after the authorities moved to a flexible currency regime as part of the International Monetary Fund deal in exchange for a $3 billion bailout to ease the financial woes.
The weakening pound in Egypt has impacted negatively consumers purchasing power as it fuels inflationary pressure in an economy where 60 percent of the population lives below the poverty line.
Already, the tea industry is feeling the pinch of the economic woes that the two countries are currently facing, which has seen the volumes of tea that they purchase decline significantly at the Mombasa auction.
Egypt, which has traditionally been the second top buyer of the Kenyan beverage, slid to position three in November last year in comparison to a year earlier, after the volumes that it purchased from Mombasa dipped 42 percent to 4.4 million kilogrammes with Pakistan recording a 13 percent drop.
In June, the Pakistani government urged its citizens to cut the volume of tea that they consume and moved ahead to limit the amount of money that importers can access from the banks to curb expensive imports in the wake of a weakening rupee.