THE DETERMINANTS INFLUENCING KENYA'S TEA EXPORTS AND THEIR IMPLICATIONS ON BALANCE OF TRADE: EVIDENCE FROM THE GRAVITY MODEL ANALYSIS
DOI:
https://doi.org/10.55955/430010Keywords:
Tea exports, trade balance, augmented gravity model, market diversification, climate adaptation, KenyaAbstract
Kenya's tea industry faces significant threats from three main structural problems; market concentration, exchange rate instability as well as climate-related performance issues. An augmented gravity model was used in evaluating factors that influence Kenya's tea export and its effect on trade balance performance. Panel data across 20 main destination markets between 2000 and 2023 was used. Findings reveal that, over 72% of exports are concentrated in five markets (Pakistan, Egypt, UK, UAE, Sudan), exposing the sector to geopolitical instability and demand fluctuations. Despite theoretical expectations that currency depreciation enhances export competitiveness, results indicate that rising input costs and delayed price adjustments have counteracted these benefits. The proposed recommendations include three strategic elements that begin with engaging the Africa Continental Free Trade Area (AfCFTA) to access West and North Africa markets and continue with aiming for 30% organic or Fair Trade export certifications by 2030 and then establishing innovation centers to enhance value-based product development. The Tea Export Stabilization Fund financial tools with their implementation strategies aim to stabilize currency fluctuations by partnering with regional neighbors for operational trade growth. The proposed measures will boost export competitiveness to create better agricultural sustainability outcomes by reducing trade imbalances in Kenya.
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