Airline revenues: IATA urges Pakistan to allow repatriation of $399mn

The International Air Transport Association (IATA), a trade body of global airlines, has called on Pakistan to immediately release airline revenues that are being held in contravention of international agreements.

“The situation has become severe with airlines unable to repatriate over $720 million ($399 million in Pakistan and $323 million in Bangladesh) of revenues earned in these markets,” read the statement.

“The timely repatriation of revenues to their home countries is critical for payment of dollar denominated expenses such as lease agreements, spare parts, overflight fees, and fuel,” Philip Goh, IATA’s Regional Vice President for Asia-Pacific, was quoted as saying.

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“Delaying repatriation contravenes international obligations written into bilateral agreements and increases exchange rate risks for airlines.

“Pakistan and Bangladesh must release the more than $720 million that they are blocking with immediate effect so that airlines can continue to efficiently provide the air connectivity on which both these economies rely,” said Goh.

The IATA’s statement highlights the trouble faced by foreign entities in repatriating profits from Pakistan, which imposed restrictions on the outflow of dollars to keep its faltering foreign exchange reserves in check.

The stock of State Bank of Pakistan (SBP)-held reserves currently stand at just under $8 billion, around two months of import cover.

IATA says blocked airline funds by countries including Pakistan threaten connectivity

The IATA, which represents some 320 airlines comprising 83% of global air traffic, also urged Pakistan to simplify the “onerous process” for repatriation.

The association noted that airlines in Pakistan are required to provide an auditor’s certificate with each remittance showing the amount to be remitted. “This can happen as frequently as twice a month, which can be time consuming and adds to the operating cost in Pakistan,” read the statement.

Moreover, airlines in Pakistan are also required to obtain a Tax Exemption Certificate from the Commissioner of Income Tax, said IATA.

The association was of the view that the certificate is redundant since airlines operating to Pakistan are covered by avoidance of double taxation, which further prolongs the fund repatriation process.

“We recognize that governments have a difficult challenge in how foreign currencies are used strategically.

“Airlines operate on razor-thin margins. They need to prioritize the markets they serve based on the confidence they have in being able to pay their expenses with revenues that are remitted in a timely and efficient fashion.

“Reduced air connectivity limits the potential for economic growth, foreign investment, and exports. With such large sums of money involved in both markets, urgent solutions are needed,” said Goh.

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Pakistan’s $350-billion economy faces a chronic balance of payment crisis, with nearly $24 billion to repay in debt and interest over the next fiscal year - three times more than its central bank’s foreign currency reserves.

Pakistan is also seeking a new long-term, larger International Monetary Fund (IMF) loan, a follow-up to its Stand-By Arrangement that was reached last year.

Islamabad says it is now seeking a loan over at least three years to help macroeconomic stability and execute long-due and painful structural reforms, though Aurangzeb has declined to detail what size the country seeks.