The International Air Transport Association (IATA), the trade body of global airlines, has called on Pakistan to immediately release airline revenues that are being held in violation of international agreements.
“The situation has become serious as the airlines have not been able to repatriate more than $720 million ($399 million in Pakistan and $323 million in Bangladesh) of revenue earned in these markets,” the statement said.
“Timely repatriation of revenue to their home countries is critical to pay for dollar-denominated expenses such as leases, spare parts, overflight fees and fuel,” said Philip Goh, IATA's regional vice president for Asia Pacific.
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“Postponing repatriation is contrary to international obligations written in bilateral agreements and increases exchange rate risks for airlines.
“Pakistan and Bangladesh need to release the more than $720 million they are blocking with immediate effect so that airlines can continue to efficiently provide the air connectivity that these two economies rely on,” Goh said.
The IATA statement highlights the difficulties foreign entities face in repatriating profits from Pakistan, which has imposed restrictions on dollar outflows to keep its dwindling foreign reserves in check.
The stock of reserves held by the State Bank of Pakistan (SBP) currently stands at just under $8 billion.
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IATA, which represents about 320 airlines that account for 83% of global air traffic, also urged Pakistan to simplify the “difficult process” of repatriation.
The association noted that airlines in Pakistan are required to provide an auditor's certificate for each payment indicating the amount to be remitted. “This can happen as often as twice a month, which can be time-consuming and increases operational costs in Pakistan,” the statement said.
In addition, airlines in Pakistan are also required to obtain a tax exemption certificate from the Commissioner of Income Tax, IATA said.
The association was of the view that the certificate is redundant as airlines operating flights to Pakistan are subject to double taxation avoidance, further prolonging the fund repatriation process.
“We recognize that governments have a difficult problem in the strategic use of foreign currencies.
“Airlines operate on very thin margins. They need to prioritize the markets they serve based on the confidence they have that they will be able to cover their expenses with revenues that are paid in a timely and efficient manner.
“Reduced air connectivity limits the potential for economic growth, foreign investment and exports. With such large sums of money in both markets, urgent solutions are needed,” Goh said.
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Pakistan's $350 billion economy faces a chronic balance-of-payments crisis, with nearly $24 billion in debt and interest payments due next fiscal year — three times the foreign exchange reserves of its central bank.
Pakistan is also seeking a new, larger, long-term loan from the International Monetary Fund (IMF), which would build on its stand-by loan arrangement reached last year.
Islamabad says it is now seeking a loan for at least three years to help macroeconomic stability and implement long-standing and painful structural reforms, although Aurangzeb declined to specify what size of country he was seeking.
