Pakistan economic crisis: The global airline industry body has warned that debt-ridden Pakistan has become “very challenging” for foreign air carriers as $290 million of funds were stuck in the country as of January, a media report has said.
Pakistan, currently in the throes of a major economic crisis, is grappling with high external debt, a weak local currency and dwindling foreign exchange reserves. Analysts believe the country is at risk of default.
The International Air Transport Association (IATA) said $290 million of funds were stuck in the country as of January this year, up nearly a third since December last year, according to the Financial Times newspaper report on Thursday.
Pakistan is holding the second-largest amount of foreign currency from airlines globally, after only Nigeria. “Airlines are facing long delays before they are able to repatriate their funds,” Philip Goh, the IATA’s Asia-Pacific head was quoted as saying in the report.
“Some airlines still have funds stuck in Pakistan from sales in 2022,” Goh said.
The IATA, which represents around 300 airlines comprising 83 per cent of global air traffic, said it has become “very challenging” for carriers to serve Pakistan as they struggle to repatriate their dues that are paid in dollars, the report said.
Pakistan Civil Aviation Authority (PCAA) has said it was trying to pay the airlines on time and has been in contact with relevant authorities over the issue.
In December 2022, the global aviation body said Pakistan has blocked $225 million it owed to international airlines, making it one of the top markets where airline funds were blocked from repatriation.
Pakistan economic crisis
The development comes at a time when Pakistan is staring at a balance of payment crisis, which is currently standing at an abysmal level of USD 4.3 billion.
The ongoing crisis has also hit the aviation industry where airlines sell tickets in local currency, but repatriate dollars to pay for expenses such as fuel costs.
The Financial Times, citing data from an aviation analytics company Cirium, reported that foreign airlines were reluctant to return to Pakistan, with fewer flights scheduled for March 2023 compared to 2019.
“If you can’t take money out of a country, then there’s no point in you even going there,” said Mark Martin, chief executive of aviation consultancy Martin Consulting, in the report.
Last month, Virgin Atlantic announced the suspension of its operations in Pakistan. Although the airline said that the decision was part of its plan to revamp operations, the Financial Times, citing a person familiar with the matter, said the decision was based on the economics of the route.
Earlier this month, the Senate Standing Committee on Aviation recommended the aviation ministry meet with the airline heads and “dispel the negative opinions about Pakistan” and convince them to resume operations.
Pakistan is awaiting a much-needed USD 1.1 billion tranche of funding from the Washington-based International Monetary Fund (IMF). The funds are part of a USD 6.5 billion bailout package the IMF approved in 2019, which analysts say is critical if Pakistan is to avoid defaulting on external debt obligations.
(With inputs from PTI)
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