Kenyan tea still held in Karachi port despite letter of credit order

tea-farm (2)

A tea plantation in Tigoni, Limuru. FILE PHOTO | NMG

Kenyan tea is still held at the Karachi port even after Islamabad gave a directive to allow banks to give traders a letter of credit (LC) to free the commodity five days ago.

The State Bank of Pakistan on Thursday listed tea as an essential food commodity, a move that would allow banks to issue LCs to tea traders.

Nearly 200 containers of Kenyan tea have since last month been held at the port in Karachi as traders lack LCS, which is mandatory before the ships are allowed to offload the beverage.

Pakistan is suffering from a serious dollar shortage, forcing it to restrict imports in order to preserve the little that is remaining in foreign reserves.

“The tea is still being held up at the port in Pakistan,” said Peter Kimanga, a tea trader at the Mombasa Auction.

The Pakistan government listed tea as an essential commodity last week on the advice of the Pakistan Tea Association in order to tame the expected high prices as the country joins the rest of the world in observing the Ramadhan season when tea is highly consumed.

“The Pakistan Association has informed that during the upcoming month of Ramadhan, domestic demand of Tea will increase substantially across the country," reads a letter by Pakistan's Ministry of Commerce. 

"However, commercial banks are reluctant to issue open letters of credit for imports of tea … due to which supply and distribution issues of the commodity in the local market have already started to surface and it may result in price hike."

Local traders say that the reprieve could be short lived as the letter from the Ministry of Trade in Pakistan makes a requisition for Ramadhan period, meaning that it could be struck out of the essential goods in a month’s time.

Traders said at least 4.8 million kilogrammes of tea were being held at the port, hitting sales back in Kenya and impacting negatively on 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 them payment.

Pakistan remains a key market for Kenya as it accounts for at least 40 percent of the total teas that Kenya exports to the world market.

The withheld tea has also impacted the Pakistani market with the price of the beverage hitting Rs1,600 (Sh740) per kilo from Rs1,100 (Sh508) due to a shortage in supply at the beginning of this month.

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