Eight countries account for 87% of total blocked funds, amounting to $1.6b: IATA
DUBAI: The International Air Transport Association (IATA) recently disclosed a promising development in the realm of global aviation finance – a notable 28 per cent reduction in the sum of airline funds held back from repatriation by governments.
As per the data released by IATA, the total volume of blocked funds as of April stood at around $1.8 billion, marking a significant decrease of $708 million compared to figures from December 2023. This positive trend, albeit heartening, underscores the pressing need for governments to expedite the removal of impediments obstructing airlines from repatriating their revenues, which emanate from ticket sales and various operational activities regulated by international agreements and treaty obligations.
“The reduction in blocked funds is a positive development. The remaining $1.8 billion, however, is significant and must be urgently addressed. The efficient repatriation of airline revenues is guaranteed in bilateral agreements. Even more importantly, it is a pre-requisite for airlines—that operate on thin margins—to be able to provide economically critical connectivity. No business can operate long-term without access to rightfully earned revenues,” Willie Walsh, IATA’s Director General, said.
The principal driver behind the observed reduction in blocked funds stems from the substantial clearance of fund blockades in Nigeria.
Furthermore, Egypt has also approved the release of a notable chunk of its previously impeded funds. Notwithstanding these positive strides, both nations witnessed the adverse impact of currency devaluation, with the Egyptian Pound and Nigerian Naira’s fluctuations posing challenges for airlines navigating the repatriation process.
At its peak in June 2023, Nigeria’s blocked funds amounted to $850 million, significantly affecting airline operations and finances in the country. Carriers faced difficulties in repatriating revenues in US dollars, and the high volume of blocked funds led some airlines to reduce their operations and one carrier to temporarily cease operations in Nigeria, which severely impacted the country’s aviation industry.
However, as of April 2024, 98 per cent of these funds have been cleared.
The remaining $19 million is due to the Central Bank’s ongoing verification of outstanding forward claims filed by the commercial banks.
However, the situation remains precarious in Pakistan and Bangladesh, where an alarming $731 million of accumulated revenues (comprising $411 million from Pakistan and $320 million from Bangladesh) have remained unrepatriated, engendering operational challenges for airlines in these markets.
Willie Walsh urged immediate action in these regions, emphasising the critical need for expeditious fund release to safeguard essential air connectivity.
In Bangladesh, the onus lies with the Central Bank to prioritise aviation’s foreign exchange accessibility as mandated by international treaties.
For Pakistan, a call to streamline alternative processes to the existing audit and tax exemption certificate system was made to mitigate prolonged processing delays.
Walsh said that Pakistan and Bangladesh must release the $731 million in blocked funds immediately to ensure airlines can continue providing essential air connectivity.
In Bangladesh, he said the solution is in the hands of the Central Bank, which must prioritise aviation’s access to foreign exchange in line with international treaty obligations.
“The solution in Pakistan is finding efficient alternatives to the system of audit and tax exemption certificates, which cause long processing delays,” he said.
