Aviation industry association, IATA, has called upon Pakistan and Bangladesh to immediately release and repatriate over airline revenues of over USD 720 million.

International Air Transport Association (IATA) has asked the governments of Pakistan and Bangladesh to immediately release revenues of foreign airlines that are being held in contravention of international agreements. 

In a press statement, IATA says that the situation has become severe with foreign airlines unable to repatriate over USD 720 million, with USD 399 million in Pakistan and USD 323 million in Bangladesh of revenues earned in these markets.

“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. Delaying repatriation contravenes international obligations written into bilateral agreements and increases exchange rate risks for airlines. Pakistan and Bangladesh must release the more than USD 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,” says Philip Goh, IATA’s Regional Vice President for Asia-Pacific.

IATA adds that Pakistan should simplify the ‘onerous’ process for repatriation. This currently includes the requirement to provide audit certificates and a tax exemption certificate, both of which cause unnecessary delays. It adds that while Bangladesh has more standardised processes, but aviation needs a higher priority from the Central Bank to facilitate access to foreign exchange. 

“We recognise that governments have a difficult challenge in how foreign currencies are used strategically. Airlines operate on razor-thin margins. They need to prioritise 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,” says Goh.

Foreign airlines operating in Pakistan face an onerous process when applying for currency repatriation. Airlines 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, it says. 

‘‘Airlines are also required to obtain a Tax Exemption Certificate from the Commissioner of Income Tax. The certificate is redundant since airlines operating to Pakistan are covered by avoidance of double taxation. This further prolongs the fund repatriation process. We urge the government to simplify this process,’’ adds IATA. 

It says that prior to Covid-19, Pakistan’s aviation sector supported around 425,000 jobs and USD 2.8 billion in economic activity. Passenger numbers recovered to pre-Covid levels in 2023, and are expected to grow by more than 2.5 times by 2040.

IATA adds that the delays in funds repatriation in Bangladesh are mainly due to a shortage of foreign exchange reserves. IATA says it has engaged with the government to prioritise the aviation sector when allocating US Dollar funds within the Bangladesh economy. This will enable foreign airlines to remit their respective earnings. ‘‘We urge the Central Bank and all authorized dealer banks in Bangladesh to prioritise the remittance of the airlines’ funds stuck in Bangladesh as soon as possible,’’ it says.

IATA says that before the pandemic, Bangladesh’s aviation sector supported around 125,000 jobs and USD 728 million in economic activity. Passenger numbers recovered to pre-Covid levels in 2023, and are expected to grow by more than twice by 2040.