The State Bank of Pakistan (SBP) has prohibited the repatriation of $225 million in airline funds.
If the central bank continues to block payments to international airline companies, Pakistan faces exclusion from the International Air Transport Association (IATA), the global liaison for ensuring airline standards and sustainability.
According to people who spoke on the condition of anonymity, the central bank has blocked outward remittances in an amount that could exceed $0.25 billion in order to control foreign currency outflows as the country struggles to recover from the ongoing liquidity crisis.
This is the second high-profile payment issue since SBP blocked $34 million in direct carrier billing (DCB) payments to international service providers such as Google, Amazon, and Meta last month.
Google suspended carrier-paid apps in Pakistan after the government refused to lift the blockade.
In an official statement, IATA warned that the amount of airline funds blocked by governments for repatriation has increased by more than 25%, or $394 million, in the last six months.
The total amount of funds blocked is now close to $2 billion. In accordance with international agreements and treaties, IATA has called on governments to remove all barriers to airlines repatriating revenues from ticket sales and other activities.
In addition, the IATA is renewing its calls on Venezuela to resolve the $3.8 billion in airline funds that have been blocked from repatriation since 2016, when the Venezuelan government granted the last authorization for limited repatriation of funds.
“Preventing airlines from repatriating funds may appear to be an easy way to shore up depleted treasuries, but ultimately the local economy will pay a high price. No business can sustain providing service if they cannot get paid and this is no different for airlines. Air links are a vital economic catalyst. Enabling the efficient repatriation of revenues is critical for any economy to remain globally connected to markets and supply chains,” said Willie Walsh, IATA’s Director General.
More than 27 countries and territories prohibit the repatriation of airline funds. Nigeria ($551 million), Pakistan ($225 million), Bangladesh ($208 million), Lebanon ($144 million), and Algeria ($140 million) are the top five markets with blocked funds (excluding Venezuela).
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