The International Air Transport Association (IATA) called on Bangladesh and Pakistan to immediately release airline revenues – worth over $720 million – that are being held in contravention of international agreements, according to a press release issued by the IATA on Wednesday.
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, IATA says.
“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 $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 Philip Goh, IATA’s Regional Vice President for Asia-Pacific.
Pakistan should simplify the onerous process of repatriation. This currently includes the requirement to provide audit certificates and a tax exemption certificate, both of which cause unnecessary delays.
Bangladesh has more standardized processes, but aviation needs a higher priority from the central bank to facilitate access to foreign exchange, said IATA.
“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.
After the Russia-Ukraine conflict began in February 2022, Bangladesh experienced a significant decrease in its foreign exchange reserves. The reserves dropped from over $40 billion to below $20 billion due to soaring commodity prices, encompassing food, energy, and fertilizer. Moreover, the Bangladeshi Taka depreciated by approximately 40%, sliding from Tk86 per dollar to Tk120 in the aftermath of the war.
The delays in funds repatriation in Bangladesh are mainly due to a shortage of US dollars. IATA 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 prioritize the remittance of the airlines’ funds stuck in Bangladesh as soon as possible.
Before COVID-19, Bangladesh’s aviation sector supported around 125,000 jobs and $728 million in economic activity. Passenger numbers recovered to pre-COVID levels in 2023, and are expected to grow by more than 2 times by 2040.
