Pakistan Prioritizes LCs for Tea

In advance of the start of Ramadan on 22 March 2023, the Pakistan government listed tea as an essential commodity on the advice of the Pakistan Tea Association in order to meet high domestic demand for tea and the country’s Ministry of Commerce directed the State Bank of Pakistan to issue mandatory instructions for banks to open letters of credit for tea, declaring the import of tea as a ‘primary import’.

Still, there seems to be a time lag for the authorization to yield results. Even after the directive of 16 March permitted banks to issue LCs, Business Daily reported that some 4.8 million kilograms of Kenyan tea was being held at port in Karachi as traders lacked the LCs needed before ships are allowed to offload the beverage. Pakistani traders are also unable to purchase more from Kenya as they cannot secure issuance of LCs in favor of sellers. According to Business Daily, Pakistan accounts for at least 40% of all tea that Kenya exports to the world market.

Pakistan is grappling with a serious dollar shortfall that has forced it to restrict imports in order to preserve its diminished foreign reserves. Local traders sense that the reprieve for LCs backing tea imports could be short lived as the Ministry’s directive covers the month-long Ramadan period, meaning that Pakistan could be with little tea by mid-April.